CANADA FX DEBT-C$ ends higher for third straight session

Fri Dec 24, 2010 1:17pm EST
 
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 * C$ rises to 99.36 U.S. cents in light trade
 * Bond prices lower across curve
 (Updates to close)
 By Ka Yan Ng
 TORONTO, Dec 24 (Reuters) - Canada's dollar finished higher
for a third straight session on Friday in sparse trade that is
expected to stretch through the rest of the year.
 The Canadian currency CAD=D4 moved in a narrow 55-point
range during a holiday-shortened North American session. It
finished at C$1.0064 to the U.S. dollar, or 99.36 U.S. cents.
 That is up from Thursday's close of C$1.0089 to the U.S.
dollar, or 99.12 U.S. cents. For the week, the currency is up
0.6 percent.
 Traders said that due to the lack of liquidity before
Christmas and New Year holidays, the currency was being driven
more by flows from orders going through.
 "Markets will be thin until the middle part of next week.
There should be some calendar year-end flow and
repatriation-related activity. The market will pick up in a
meaningful way after the new year," said Jack Spitz, managing
director of foreign exchange at National Bank Financial.
 There was no data due on Friday, and none from Canada until
the new year. Some U.S. data, such as Midwest manufacturing for
November, some housing statistics and consumer confidence
figures, are due next week but are unlikely to push the
currency much outside the range of parity to C$1.04 that has
become well-established over the past three months.
 Once the new year is underway, Canada's dollar is likely to
climb, and perhaps hit parity with the U.S. currency, on a
supportive backdrop of strong commodity prices as well as
expectations the Bank of Canada will resume raising interest
rates.
 Euro zone debt remains one of the key factors to watch next
year. But the Canadian dollar might be able to stay somewhat
insulated against having that crisis weigh significantly since
Canada has little direct exposure to euro zone sovereign debt.
 "The focus remains on sovereign risk. That combined with
the Bank of Canada hiking rates in the second half, before some
of the other major central banks, will widen spreads in
Canada's favor," said Camilla Sutton, chief currency strategist
at Scotia Capital.
 The Canadian dollar's high on Friday was C$1.0050 to the
greenback, or 99.50 U.S. cents, its strongest level in a week,
as oil hovered around its highest price levels in more than two
years, supported by cold weather across the globe and appetite
for risk assets. [O/R]
 Canadian bond prices were mildly lower, weighed by the
fairly positive economic data from the previous session, with
little impetus to trade in the shortened session.
 Thursday's U.S. durable goods data and rising consumer
spending reinforced expectations for strong economic growth in
the fourth quarter.
 The two-year bond CA2YT=RR was down 6 Canadian cents to
yield 1.696 percent, while the 10-year bond CA10YT=RR slipped
8 Canadian cents to yield 3.178 percent.
 Canadian markets will reopen on Wednesday.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)