CANADA FX DEBT-C$ lower in choppy trading, bonds retreat

Wed Feb 23, 2011 8:22am EST
 
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   * C$ slips to $1.0087, near session low
 * Bonds unwind previous session's price gains
 TORONTO, Feb 23 (Reuters) - Canada's dollar was near a
session low against the U.S. greenback on Wednesday morning
amid choppy trading and stronger oil prices.
 Stronger oil prices typically help the Canadian currency,
owing to Canada's status as a significant oil exporting nation.
On the other hand, rising oil prices have also fanned concerns
about inflation that could hamper a global economic recovery.
 Brent crude futures rose as Libya's turmoil fuelled fears
the unrest could spread to other oil-producing nations and
choke supplies. U.S. crude futures CLc1, which have more of
an impact on Canada's currency, firmed to the highest level
since October 2008.
 The euro and sterling rose versus the U.S. dollar as
comments by European Central Bank officials and Bank of England
minutes were seen increasing the chances of euro zone and UK
interest rate rises. [ID:nLDE71L23Y] [ID:nLDE71L13A] [FRX/]
 "It's getting kicked around by selling of Canada against
the rising euro (as) ... high oil prices will lead to quicker
interest rate hikes. But at the same time, the high oil prices
are good for Canada," said Michael O'Neill, managing director
at Knightsbridge Foreign Exchange.
 "The good is being offset by the bad to a certain extent."
 He put the daily range between C$0.9860-C$0.9960 to the
U.S. dollar.
 At 8:05 a.m. (1305 GMT), the currency CAD=D4 was at
C$0.9914 to the U.S. dollar, or $1.0087, down from Tuesday's
North American session close at C$0.9909 to the U.S. dollar, or
$1.0092. Earlier, the currency slipped as low as C$0.9919 to
the U.S. dollar, or $1.0082.
 No major Canadian data is scheduled for the rest of the
week, leaving the Canadian dollar subject to geopolitical
events, U.S. data and the direction of equity and oil markets.
 Canadian government bonds fell across the curve, unwinding
much of the previous session's flight to safer assets.
 The two-year Canadian government bond CA2YT=RR slid 5
Canadian cents to yield 1.820 percent, while the 10-year bond
CA10YT=RR fell 14 Canadian cents to yield 3.376 percent.
 (Reporting by Ka Yan Ng; Editing by Kenneth Barry)