CANADA FX DEBT-C$ firms on stock market rise

Tue Dec 23, 2008 10:02am EST
 
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 * Canada dollar rises 0.2 percent
 * Stocks stronger, oil up slightly
 * Bond prices mixed, weak on long end
 By Cameron French
 TORONTO, Dec 23 (Reuters) - The Canadian dollar rose
slightly versus the U.S. currency on Tuesday, helped by
stronger stock prices, while thin markets and steady commodity
prices gave traders little incentive to take big positions.
 Canadian bond prices were mixed, outperforming weaker U.S.
Treasuries.
 At 9:35 a.m. (1435 GMT), the currency was at C$1.2161 to
the U.S. dollar, or 82.23 U.S. cents, up from C$1.2190 to the
U.S. dollar, or 82.03 U.S. cents, at Monday's close.
 Canada's main equity index rose 1 percent shortly after the
opening, giving the currency a slight boost.
 But with trading floors thinly staffed ahead of year-end
holidays, the Canadian dollar is being driven mainly by
year-end fund adjustments and orders from corporate clients,
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
 "It's order-driven activity amid thin liquidity," he said.
 The thin volumes mean the currency could be susceptible to
wide swings, but analysts said not to read too much into any
such moves.
 "The C$1.18-C$1.24 range has been in place for the last
week. It really could trade at either end and nobody would
surprised, given the factors that have been in play," Spitz
said.
 Oil prices, which often drive the currency, were up a
modest 0.5 percent, while data showing an as-expected 0.5
percent decline in third-quarter U.S. gross domestic product
had little impact on the currency.
 Canadian October GDP will be released on Wednesday, with a
decline of 0.3 percent expected.
 BONDS MIXED
 Canadian bond prices were split but fairly flat,
outperforming weaker U.S. Treasuries, which fell ahead of a
five-year auction.
 Canadian bond yields are around their lowest levels in more
than a decade as recession fears have driven investors to
liquidate stock and commodity holdings and shift their funds
into safe-haven debt.
 The two-year bond slipped 2 Canadian cents to C$102.84 to
yield 1.251 percent. The 10-year bond rose 10 Canadian cents to
C$111.80 to yield 2.815 percent.
 The yield spread between the two-year and 10-year bond was
at 157 basis points, flat from the previous close.
 The 30-year bond fell 30 Canadian cents to C$127.00 to
yield 3.494 percent. In the United States, the 30-year Treasury
yielded 2.678 percent.
 (Reporting by Cameron French; editing by Peter Galloway)