CANADA FX DEBT-C$ gains on data, prospect of U.S. Fed move

Fri Sep 24, 2010 4:23pm EDT
 
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 * 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/]
 BONDS SLIP
 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)