CANADA FX DEBT-C$ firms near three-year high, oil boosts

Fri Feb 25, 2011 1:07pm EST
 
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   * C$ stood at C$0.9811, or $1.0193
 * Reaches highest level since March, 2008
 * Recent commodity price spike still supporting
 * Shrinking budget deficit provides brief lift
 * Bond prices mostly firmer
 (Updates with details, further analyst comment)
 By Solarina Ho
 TORONTO, Feb 25 (Reuters) - Canada's dollar hit a near
three-year high against its U.S. counterpart on Friday, helped
by a narrower budget deficit, oil's recent rise and a growing
view it is less vulnerable than many other currencies to global
shocks.
 The currency broke the C$0.98 barrier even though oil
pulled back slightly on Friday after recently hitting
two-and-a-half year highs. [O/R]
 The Canadian dollar firmed as high as C$0.9792, or $1.0212,
its strongest showing since March 2008, just after Canada
reported its 9-month budget deficit shrank compared to a year
ago. [ID:nOLAPDE77U]
 "Canada has benefited a little bit from ... its relative
safe haven status, considering all the things going on in the
world -- the unrest in the Middle East and Northern Africa,"
said Steve Butler, director of foreign exchange trading at
Scotia Capital.
 "We got below 98 (Canadian) cents, but didn't stay there
for too long. The market will be a little bit cautious about
getting overly extended."
 At 12:10 (1710 GMT), the currency CAD=D4 stood at
C$0.9811 to the U.S. dollar, or $1.0193, up from Thursday's
North American finish of C$0.9832 to the U.S. dollar, or
$1.0171.
 The gain came after Toronto's main stock index jumped back
above 14,000 in a broad relief rally led by the mining-heavy
materials sector and influential banks. [.TO]
 "Markets right now are recovering from some of the losses
from the last couple of days, so that's probably helping to
support the Canadian dollar," said Jacqui Douglas, currency
strategist at TD Securities.
 "The move lower in USD/CAD really has not had too much
momentum behind it. It seems like it's been a pretty slow grind
lower. All these new multi-year lows seem to be hit in 10
points at a time, 20 points at a time."
 Scotia's Butler noted that the market was somewhat cautious
heading into the weekend and month-end on Monday.
 "That's all about flows and we sort of throw fundamentals
out the window," he said. He saw resistance for the Canadian
dollar at C$0.9780-C$0.9790 and support levels around
C$0.9850-C$0.9860.
 Canada reports GDP figures on Monday and the Bank of Canada
will be announcing its next rate decision on Tuesday.
 "Looking at all the risks out there with the GDP, Bank of
Canada, and what's happening globally, I think the risk is a
bigger move to the upside (for the U.S. dollar) than a move to
the downside," said Douglas.
 Canadian bond prices were mostly firmer. The two-year bond
CA2YT=RR was up 1.5 Canadian cents to yield 1.791 percent,
while the 10-year bond CA10YT=RR added 23 Canadian cents to
yield 3.292 percent.
 (Editing by Jeffrey Hodgson)