CANADA FX DEBT-C$ gains on data, prospect of U.S. Fed move
* C$ ends at 97.50 U.S. cents
* Rises 0.6 percent on the week
* U.S. data helps pull bond prices lower (Updates to close, adds quote)
By Jennifer Kwan
TORONTO, Sept 24 (Reuters) - The Canadian dollar ended higher against the U.S. dollar on Friday, supported by U.S. data that eased fears of a sputtering economy and encouraged a move away from safer-haven assets.
Investor thirst for risk was whetted by data that showed new orders for long-lasting U.S. manufactured goods, excluding transportation, rose in August and business spending rebounded strongly. [ID:nN24184114]
The Canadian dollar CAD=D3 shot as high as C$1.0225 to the U.S. dollar, or 97.80 U.S. cents, following the release of that data, but pared gains to end the day at C$1.0256 to the U.S. dollar, or 97.50 U.S. cents. On Thursday, the currency finished at C$1.0340 to the U.S. dollar, or 96.71 U.S. cents.
It was up 0.6 percent for the week.
While there was relief in the market after the release of the U.S. data, another key factor pushing the Canadian currency higher was the overhang from a U.S. Federal Reserve statement on Tuesday, market watchers said.
The U.S. central bank stirred markets by expressing greater concern about sluggish U.S. growth and low levels of inflation in a statement that many took as opening the door wider to pumping more dollars into the economy. For details, see [ID:nTRU002490] [ID:nN20109053]
"That's generally good for the Canadian dollar, bad for the U.S. dollar. The promise of quantitative easing appears to be underpinning a general rally in risky assets," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
Still, Bank of Canada Governor Mark Carney on Friday expressed concern that the Federal Reserve may be forced to take further steps to support the struggling U.S. economy, which is being pressured by very low inflation and high debt levels. [ID:N24205364]
"The takeaways from him are essentially that the Bank of Canada is going to adjust monetary policy to the Canadian story, but there are limits to how far the two interest rates can diverge from each other," said Camilla Sutton, chief currency strategist at Scotia Capital.
Sutton said the Canadian dollar was also supported by rallying North American equity markets, typically a barometer of risk appetite. As well, prices for oil and other commodities were higher, while U.S. gold futures rallied to record highs above $1,300 an ounce. [.TO] [.N] [O/R] [GOL/]
Rising confidence in the global economy put some pressure on Canadian government bonds, cutting into recent gains.
The two-year government of Canada bond edged 12 Canadian cents lower to yield 1.474 percent, while the 10-year bond sank 30 Canadian cents to yield 2.871 percent.
Canadian bonds notched a mixed performance against U.S. Treasuries. The Canadian two-year bond CA2YT=RR was 103 basis points above the U.S. two-year yield, compared with about 100 basis points above in the previous session. (Editing by Peter Galloway)
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