June 26, 2009 / 9:05 PM / in 8 years

CANADA FX DEBT-C$ edges higher, down on week; bonds mixed

* C$ up at 86.64 U.S. cents; off 1.7 pct on the week

* Bonds advance as equities drift lower

* Light trading expected next week, focus on U.S. jobs (Adds details)

TORONTO, June 26 (Reuters) - The Canadian dollar finished higher on Friday, trimming gains against the U.S. currency as oil prices lost ground and market players looked to consolidate positions heading into the weekend.

Early action saw the currency boosted by firm commodity prices, while the greenback weakened on a revival in investors’ thirst for riskier assets. The currency reached as high as C$1.1445 to the U.S. dollar, or 87.37 U.S. cents.

However, the currency gave up much of those gains as the price of oil, a key Canadian export, fell to around $69 a barrel. Equity markets also came off session highs, taking a bite out of risk appetite.

Still, the Canadian dollar finished at C$1.1542 to the U.S. dollar, or 86.64 U.S. cents, up from C$1.1562 to the U.S. dollar, or 86.49 U.S. cents, at Thursday’s close.

“I just think the way that equities have been slowly drifting off, it’s been a bit of a consolidation day. We’ve probably seen a good part of the range for this session,” said Steve Butler, director of foreign exchange trading at Scotia Capital.

“We’ve had a couple of topsy-turvy days, but really no direction again this week.”

The currency is off 1.7 percent on the week, as the range shifted lower between C$1.1335-C$1.1639, compared with C$1.1183-C$1.1450 last week. The Canadian dollar has cooled in recent weeks after surging about 20 percent between March and the beginning of June, partly from volatile oil prices and after the Bank of Canada sounded the alarm about the currency’s quick ascent.

Next week’s trading may be volatile because of two market holidays, the July 1 Canada Day and Independence Day in the U.S., which will be observed on Friday.

The currency may continue to stay rangebound until the biggest data point of the week -- the U.S. non-farm payrolls figure for June, which is likely to overshadow Canadian GDP for April. ECON

“It’s a very light data calendar next week. The big event will be the U.S. nonfarm payrolls, so we’ll see bigger price action on the back of that rather than the Canadian data,” said Charmaine Buskas, senior economics strategist at TD Securities.

MOST BONDS ADVANCE

As equity markets gave up early gains, most Canadian bond prices moved higher across the curve, mirroring their U.S. counterparts. [ID:nN26322395]

Market players appeared to be taking the Bank of Canada’s debt auction announcement in stride, despite the boost to issuance.

The central said on Thursday that gross government bond issuance in the current fiscal year would be about 25 percent higher than the C$82 billion originally forecast in the federal budget. [ID:nN25298355]

The benchmark two-year government bond rose 8 Canadian cents to C$100.10 to yield 1.199 percent, while the 10-year bond dipped 5 Canadian cents to C$102.90 to yield 3.403 percent.

The 30-year bond was unchanged at C$118.50 to yield 3.905 percent. The comparable U.S. issue yielded 4.334 percent.

Canadian bonds underperformed U.S. treasuries across the curve, except in the three-year issue. The Canadian 30-year bond was 42.9 basis points below the U.S. 30-year yield, little changed from 42.6 basis points on Thursday. (Reporting by Ka Yan Ng; editing by Rob Wilson)

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