4 Min Read
* 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]
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)