Canada dollar rebounds as commodity prices rise

Tue May 27, 2008 9:34am EDT
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 * Canadian dollar reclaims portion of recent losses
 * Canadian dollar on track to end 3-session skid
 * Bonds drop ahead of U.S. home sales data
 By Frank Pingue
 TORONTO, May 27 (Reuters) - The Canadian dollar rose
against the U.S. dollar on Tuesday along with other
commodity-linked currencies and higher oil prices, putting it
on track to end a three-session retreat.
 Domestic bond prices, with no Canadian economic data to
consider, fell across the curve ahead of the U.S. new home
sales data for April due out shortly.
 At 9:20 a.m. (1320 GMT), the Canadian currency was at
US$1.0086, valuing a U.S. dollar at 99.14 Canadian cents, up
from US$1.0081, valuing a U.S. dollar at 99.20 Canadian cents,
at Monday's close.
 The bulk of the Canadian dollar's rise occurred during the
overnight session, along with gains in the Australian and New
Zealand dollars, all buoyed by lofty commodity prices. It rose
as high as US$1.0133, valuing a U.S. dollar at 98.69 Canadian
 For now, oil prices firm above $130 a barrel, not far off
last week's record high above $135 a barrel, outweighed some
concerns about how higher fuel costs could hurt the global
 "The market is anticipating that the worst has sort of
passed for the market in terms of the fallout and people's
outlooks are a little bit more optimistic," said George Davis,
chief technical strategist at RBC Capital Markets.
 "And as a result of that the Canadian dollar has tended to
benefit and the focus has moved back to commodities and crude
oil in particular."
 Prices for many of the commodities that Canada produces are
sitting at high levels but are not having as positive an impact
on the currency as they once had.
 The domestic currency shot 17.5 percent higher last year
versus the U.S. dollar due in large part to gains in the price
of oil. But crude oil has soared almost 40 percent this year
and the Canadian dollar is only up about 0.5 percent.
 Canadian bond prices were all lower along with the bigger
U.S. Treasury market as dealers positioned themselves ahead of
the 10:00 a.m U.S. home sales report.
 Max Clarke, an economist at IDEAglobal in New York, also
said lofty commodity prices could be weighing on bond prices.
 The key Canadian data for the week are not due until Friday
when the first-quarter gross domestic product report is
 The overnight Canadian LIBOR rate LIBOR01 was at 3.0400
 Monday's CORRA rate CORRA= was 3.0101 percent, down from
3.0135 percent on Friday. The Bank of Canada publishes the
previous session's rate at around 9 a.m. daily.
 The two-year bond was down 7 Canadian cents at C$101.35 to
yield 3.052 percent. The 10-year bond dropped 21 Canadian cents
to C$102.52 to yield 3.668 percent.
 The yield spread between the two- and 10-year bond was 61.6
basis points, down from 63.6 at the previous close.
 The 30-year bond shed 19 Canadian cents to C$115.26 for a
yield of 4.096 percent. In the United States, the 30-year
Treasury yielded 4.640 percent.
 The three-month when-issued T-bill yielded 2.74 percent, up
from 2.67 percent at the previous close.
 (Editing by Bernadette Baum)