CANADA FX DEBT-C$ up with stocks, oil, shrugs off Carney

Mon Sep 28, 2009 4:51pm EDT
 
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 * Canadian dollar ends at 91.95 U.S. cents
 * Bank of Canada repeats strong C$ could harm recovery
 * Canadian gov't economic update has little impact
 * Bonds flat to higher
 (Adds details)
 By Ka Yan Ng
 TORONTO, Sept 28 (Reuters) - The Canadian dollar finished
higher against the greenback on Monday as renewed appetite for
risk outweighed the Bank of Canada's repetition of its warning
that a persistently strong currency could undermine the
recovering domestic economy.
 Bonds maintained their flat-to-higher showing after the
central bank's remarks.
 Echoing statements he has made before, Bank of Canada
Governor Mark Carney told a business audience in Victoria,
British Columbia, that the effects of a rising Canadian dollar
could offset gains made in putting the economy back on its
feet.
 He allowed, though, that some of the currency strength was
justified by higher commodity prices and improved economic
conditions.  [ID:nBAC000325]
 The currency was little changed after the prepared remarks
were published, already stronger on the day due to a rebound in
the price of oil and an accompanying rally in stock markets.
 Carney said nothing that had not already been said in the
bank's Sept. 10 policy statement, said Sal Guatieri, senior
economist at BMO Capital Markets. "Still (he) cited the
Canadian dollar as a concern, (he's) still concerned about
whether private demand will hold up after the policy stimulus
abates."
 The Canadian dollar closed at C$1.0875 to the U.S. dollar,
or 91.95 U.S. cents, up from Friday's close of C$1.0917 to the
U.S. dollar, or 91.60 U.S. cents.
 The currency hit a three-week low versus the greenback
overnight, reaching C$1.0996 to the U.S. dollar, or 90.94 U.S.
cents, but turned higher as stock markets climbed, recovering
some of the ground lost in a three-day slide.
 Oil, a key Canadian export, moved above $67 a barrel. [O/R]
Equities and energy markets often influence the direction of
the Canadian dollar as they are seen as barometers of risk
appetite.
 "Risk sentiment remains. When I look at global stocks
markets, they still remain resiliently bullishly poised," said
David Watt, senior currency strategist at RBC Capital Markets.
 "In that backdrop it just doesn't look set for a period of
unwinding of the (U.S.) dollar shorts."
 A progress report from Prime Minister Stephen Harper on the
measures taken so far to lift economic growth had little impact
on the currency. Meanwhile, Canada's main opposition Liberal
Party said on Monday it would press ahead with an effort to
bring down the Conservative government in Parliament this week
[ID:nOTW002427] [ID:nN2889888]
 BONDS FLAT-TO-HIGHER
 Canadian bonds were little changed by Carney's warning that
renewed signs of economic growth should not give way to
complacency.
 There was no Canadian economic data on Monday, but markets
are preparing for a host of statistics from Canada and the
United States this week, including July gross domestic product
for Canada and U.S. jobs for September.
 The two-year bond CA2YT=RR was up 1 Canadian cent at
C$99.48 to yield 1.273 percent, while the 10-year bond
CA10YT=RR gained 27 Canadian cents to C$103.45 to yield 3.329
percent. The 30-year bond CA30YT=RR was up 35 Canadian cents
at C$119.20 to yield 3.864 percent.
 Canadian bonds underperformed their U.S. counterparts,
except in the three-year maturity. The Canadian 10-year bond
was 4.5 basis points above the U.S. 10-year yield, versus 4.7
basis points on Friday.
  (Editing by Peter Galloway)