CANADA FX DEBT-C$ holds near par, economic optimism helps

Thu Dec 30, 2010 9:32am EST
 
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 * Canadian dollar inches up to 99.99 U.S. cents
 * Bonds mixed, tracking U.S. Treasury prices
 TORONTO, Dec 30 (Reuters) - Canada's dollar held near par
with a broadly easing U.S. dollar on Thursday in quiet trade,
shrugging aside softening crude oil prices as the long-term
outlook on the U.S. economy helped the commodity-influenced
currency.
 At 9:20 a.m. (1320 GMT), the Canadian dollar was at
C$1.0001 to the U.S. dollar, or 99.99 U.S. cents, up slightly
from C$1.0006 to the U.S. dollar, or 99.94 U.S. cents, at
Wednesday's close.
 The U.S. dollar weakened broadly as traders took a drop in
U.S. bond yields as a cue to sell. [FRX/]
 Overnight, the Canadian dollar tracked gains in other
commodity-based currencies, the New Zealand and Australian
dollars, on broad-based strength in global commodity prices.
 As the price of crude oil retreated below $91 a barrel, the
Canadian dollar pared gains but held within ticks to par with
the U.S. dollar as it has all week.
 It has yet to close a session at or above par since
November. The Canadian dollar has reached a one-for-one footing
with the U.S. currency a handful of times this year but has not
sustained that level for long.
 Mounting confidence about the U.S. economy should help
support the Canadian dollar as well because Canada's
export-oriented economy is highly tied to the health of the
United States.
 "Markets are thin, but the underlying economic optimism
should contribute to more (U.S.) dollar selling heading into
the new year," said Jack Spitz, managing director of foreign
exchange at National Bank Financial. He said the Canadian
dollar could again test the recent peak at 99.75 Canadian cents
to the U.S. dollar, its highest since late April.
 Short-dated Canadian government bond prices eased, tracking
U.S. Treasuries, as jobless data suggested the U.S. labor
market recovery was gaining strength.
 New U.S. claims for unemployment benefits dropped more than
expected last week to their lowest level in more than two
years. [ID:nN3097646]
 The two-year bond CA2YT=RR slipped 3 Canadian cents to
yield 1.710 percent. But longer-dated issues were slightly
firmer with equity markets indicating a soft open. The 10-year
bond CA10YT=RR rose 11 Canadian cents to yield 3.147
percent.
 (Reporting by Ka Yan Ng; Editing by Padraic Cassidy)