CANADA FX DEBT-C$ firms amid political risk, oil, euro support

Thu Mar 24, 2011 9:25am EDT
 
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 * Canadian dollar firms to C$0.9773, or $1.0232
 * Bonds mixed across the curve
 By Solarina Ho
 TORONTO, March 24 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Thursday,
supported by stronger oil prices, the euro and ahead of an
expected no-confidence motion that will likely bring down the
federal government.
 Canada's minority Conservative government was set to fall
on Friday following opposition charges of incompetence and
questionable ethics and after the opposition rejected the
government's budget plan.
 If the opposition does bring down the government, it would
result in an election by early May, but one that might not
change the political landscape dramatically. [ID:nN23287439]
[ID:nN23200321]
 "I think the market went long dollar just on the political
risk and I think the worst-case scenario that's going to happen
is there's going to be another election and we're going to get
a minority government, which is what we have right now," said
David Bradley, director of foreign exchange trading at Scotia
Capital.
 "There's a possibility the Conservatives might win a
majority, so I think if that's the case, the C$ should
strengthen," he said, adding that there was still a possibility
the opposition NDP and the Conservatives could hash out a
resolution to prevent an election.
 Bradley also noted that some traders exited their positions
because the USD/CAD failed to rally after Tuesday's budget.
 U.S. crude prices ticked higher amid a decline in U.S.
gasoline stockpiles, which helped the commodity-linked Canadian
dollar. [O/R]
 The Canadian dollar was also supported by a stronger euro,
which rebounded as the region's debt worries were increasingly
priced in. [FRX/]
 At 8:51 a.m. (1252 GMT), the currency CAD=D4 stood at
C$0.9773 to the U.S. dollar, or $1.0232, up from Wednesday's
North American finish of C$0.9807, or $1.0197.
 With no Canadian data on tap, Bradley expected the
resistance level to fall between C$0.9710 and C$0.9750 and the
support level around the C$0.9800 range.
 Canadian bond prices were mixed across the curve. [US/]
 The two-year bond CA2YT=RR was down 4 Canadian cents to
yield 1.702 percent, while the 10-year bond CA10YT=RR was up
5 Canadian cents to yield 3.209 percent.
 (Editing by Leslie Adler)