CANADA FX DEBT-C$ gains after data shows growth in August

Fri Oct 29, 2010 9:17am EDT
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 * C$ touches high of 98.33 U.S. cents
 * Currency gets boost from domestic GDP data, weak US$
 * Bond prices edge higher
 By Jennifer Kwan
 TORONTO, Oct 29 (Reuters) - The Canadian dollar firmed to a
session high against its U.S. counterpart on Friday morning
after data showed that Canada's economy resumed growing in
August after a brief downturn in July.
 Growth was bolstered by wholesale trade, manufacturing and
oil and gas extraction, Statistics Canada said on Friday.  
Gross domestic product by industry climbed 0.3 percent in the
month, as expected in a Reuters poll, compared with a 0.1
percent contraction in July. [ID:nN29434455]
 The combination of the Canadian data and a softer U.S.
dollar, following the release of U.S. growth data, pushed up
the Canadian currency, said Camilla Sutton, chief currency
strategist at Scotia Capital.
 "The biggest fear for Canada is that we soften on the back
of the U.S. It was all fairly positive and the Canadian dollar
has rallied on the back of it," she said.
 The currency CAD=D4 firmed to C$1.0170 to the U.S.
dollar, or 98.33 U.S. cents after the data was released. At
8:59 a.m. (1259 GMT), it stood at C$1.0174 to the U.S. dollar,
or 98.29 U.S. cents, up from Thursday's close at C$1.0215 to
the U.S. dollar, or 97.90 U.S. cents.
 U.S. data showed economic growth edged up as expected in
the third quarter but not enough to chip away at high
unemployment or change perceptions of more monetary easing from
the Federal Reserve next week. [ID:nN28207235]
 "There's a lot of risk going into the FOMC (Federal Open
Market Committee)," Sutton said of the U.S. central bank's
policy-setting meeting next week.
 "The potential was that we saw a stronger than expected GDP
print and then that would create fears that the FOMC wouldn't
be as aggressive as the market thinks they're going to be right
now and that would cause U.S. dollar short covering. With the
relief of that out of the way, the U.S. dollar is weakening off
 Investors have been reassessing their estimates of how much
money the Federal Reserve may commit to a second round of
monetary stimulus -- widely dubbed "QE2" -- when it meets.
 Canadian government bond prices were flat to higher with
the two-year bond CA2YT=RR up 1 Canadian cent to yield
1.427percent, while the 10-year bond CA10YT=RR gained 13
Canadian cents to yield 2.857 percent.
 (Reporting by Jennifer Kwan, Editing by Chizu Nomiyama)