CANADA FX DEBT-C$ ekes gain on oil, soft USD, politics eyed

Fri Mar 25, 2011 8:48am EDT
 
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   * C$ firms to C$0.9759, or $1.0247
 * Bond prices higher as risk appetite wanes
 * Politics in focus as government seen falling
 By Solarina Ho
 TORONTO, March 25 (Reuters) - The Canadian dollar ticked
higher against its U.S. counterpart on Friday as oil and
general U.S. dollar weakness helped lift the currency ahead of
political drama that could bring down the Canadian minority
government.
 The Conservative government is set to fall on Friday with a
likely motion of no-confidence from the opposition parties
after they rejected the government's budget plan earlier this
week and also accused them of incompetence and dubious ethics.
[ID:nN24163285]
 However, with polls showing the Conservatives likely to
return with another minority government should an election
occur in May and the country's economic health relatively
stable, the political upheaval might not move the Canadian
dollar significantly compared to similar scenarios in other
countries. [ID:nN24181946] [ID:nN23274742] [ID:nN24147138]
 "I think that the market has somewhat discounted (the
elections) for the time being. We're waiting to see what news
comes today," said C.J. Gavsie, managing director of foreign
exchange sales at BMO Capital Markets.
 "The driver is continuing to be what's going on in the
external basis. The U.S. dollar has given a little bit of
ground versus the other currencies."
 The euro brushed away worries about Portugal's debt
worries, while the Australian dollar, often a commodity-linked
sister currency to Canada, hovered just shy of a 29-year high
against the greenback. [FRX/]
 Gavsie noted that traders who wanted to be net-short on the
USD/CAD came in overnight to add to the existing short
positions.
 Oil continued to be a major story for the commodity-linked
Canadian dollar as well, with strong oil prices -- bolstered by
Middle East unrest and the military campaign in Libya --
providing support.
 At 8:20 a.m. (1220 GMT), the currency CAD=D4 stood at
C$0.9759 to the U.S. dollar, or $1.0247, up marginally from
Thursday's North American closed of C$0.9762, or $1.0244.
 How the equity markets will perform today will further
determine how much stronger the Canadian dollar will get,
Gavsie said. He expected the currency to find resistance around
C$0.9740 and support at C$0.9810 on Friday.
 "There's probably more likelihood for Cad strength on a day
like this, but we'll have to wait to see how the equities play
out."
 Canadian government bond prices rose across the curve,
mirroring the U.S. Treasuries, as the appetite for risk eased
on worries about the euro zone peripheral debt. [US/]
 The two-year bond CA2YT=RR was up 3.5 Canadian cents to
yield 1.691 percent, while the 10-year bond CA10YT=RR added 7
Canadian cents to yield 3.209 percent.
 (Editing by Theodore d'Afflisio)