CANADA FX DEBT-C$ shoots higher, ends May up 9.3 percent

Fri May 29, 2009 4:48pm EDT
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 * C$ hits session high of 91.76 U.S. cents
 * Biggest monthly gain in nearly 60 years
 * Bond prices get late boost and end higher
 By Frank Pingue
 TORONTO, May 29 (Reuters) - Canada's currency raced higher
versus the U.S. dollar on Friday and touched its highest level
in nearly eight months as commodity prices surged and upbeat
economic data sideswiped the greenback.
 After hoarding U.S. dollars during the worst of the global
financial crisis, investors have started to unload the currency
because of continuing signs that the worst of the global
recession may have passed.
 "It really was less of a Canadian dollar story and more of
a U.S. dollar story as the U.S. dollar itself was weak across
the board," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
 "The Canadian dollar was just moved along with the other
commodity, cyclical, risk-type currencies ... in conjunction
with the better appetite for global risk."
 A good chunk of the Canadian dollar's surge came after data
showed the U.S. economy contracted less than initially expected
in the first quarter, which diminished the safe-haven allure of
the greenback [ID:nN28352285].
 That data helped add to gains already under way as signs of
economic strength from Japan and India overnight gave a bid to
Canada's currency.
 The Canadian dollar rose to C$1.0898 to the U.S. dollar, or
91.76 U.S. cents, shortly after midday, its highest level since
Oct. 6, extending its torrid climb since falling to a four-year
low in early March.
 Other factors helping to fuel the rally were a jump in oil
prices to a six-month high and a three-month high in gold
 The currency retreated a touch but still ended the session
at C$1.0917 to the U.S. dollar, or 91.60 U.S. cents, which was
nearly 2 U.S. cents above Thursday's close of C$1.1148 to the
U.S. dollar, or 89.70 U.S. cents.
 The Canadian dollar has now stormed 19.7 percent above its
March low, a move credited to a combination of higher prices
for key Canadian commodities, some upbeat economic data and
lower demand for the U.S. dollar.
 The Canadian dollar rallied 9.3 percent in May, its biggest
monthly gain since at least October 1950, according to Bank of
Canada data that dates back to 1950.
 The Canadian dollar did not appear to be affected by a
report that showed Canada's current account deficit widened to
a record high in the first quarter as the global recession
shrank the country's surplus in goods trade. [ID:N29257696]
 The next Canadian data due out is Monday's gross domestic
product report, which is expected to show the economy shrank at
an annualized rate of 6.6 percent in the first quarter.
 It will be the last piece of data ahead of the Bank of
Canada's scheduled interest rate announcement on Thursday.
 Canadian bond prices, mixed for much of the session, ended
higher across the curve alongside the bigger U.S. Treasury
market as dealers moved back into government debt after a steep
selloff earlier in the week.
 "It's mostly just a correction of the huge selloff we had
earlier this week," said Sheldon Dong, fixed income analyst at
TD Waterhouse Private Investment. "Plus, this is the last day
of the month so you might have a bit of portfolio index buying
... and that's why you got that late afternoon rally."
 Dong said the Canadian bond market will take its cue from
Monday's domestic GDP data and Thursday's Bank of Canada rate
announcement and accompanying statement.
 The benchmark two-year government bond ended up 8 Canadian
cents at C$100.03 to yield 1.234 percent, while the 10-year
bond rose 65 Canadian cents to C$103.00 to yield 3.394
 The 30-year bond jumped 60 Canadian cents to C$116.10 to
yield 4.035 percent.
 Canadian bonds underperformed their U.S. counterparts
across most of the curve. The 30-year bond yield was about 31
basis points below the U.S. 30-year yield, compared with about
42 basis points on Thursday.
 (Editing by Peter Galloway)