CANADA FX DEBT-C$ rises as Canada exits recession, bonds up

Mon Nov 30, 2009 4:38pm EST
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 * Canadian dollar ends up at 94.73 U.S. cents
 * Canada exits recession but growth below expectations
 * Bonds mildly stronger after disappointing headline GDP
 By Ka Yan Ng
 TORONTO, Nov 30 (Reuters) - The Canadian dollar finished
higher versus the U.S. currency on Monday after numbers showed
Canada officially exited recession and as risk appetite perked
up as Dubai's debt woes started to look less worrisome.
The currency eased from early highs after gross domestic
product data for the third quarter came in below expectations.
Statistics Canada reported annualized real growth in gross
domestic product for the quarter of 0.4 percent, short of the
market forecast for 0.7 percent growth. [ID:nN30349047]
 But as the session wore on, Canada's currency picked up
steam alongside firming equity markets and a higher price of
oil, two key barometers for the currency.
 Oil prices rose more than $1 on Monday as U.S. dollar
weakness outweighed concerns over debt-laden Dubai and its
impact on the global economy. [O/R]
 "It's a matter of some risk aversion moving to the
background," said Camilla Sutton, currency strategist at Scotia
 "All in all, (the GDP figures) were disappointing but the
market was able to brush them off."
 The Canadian dollar finished at C$1.0556 to the U.S.
dollar, or 94.73 U.S. cents, up from C$1.0615 to the U.S.
dollar, or 94.21 U.S. cents, at Friday's close.
 Last week, the Canadian dollar fell to its lowest level in
nearly three weeks, as risk-aversion jumped on concern about
the once-booming Gulf region's financial health.
 Canadian bonds edged up across the curve as the headline
figure on economic growth was lower than expected, but firmer
equity markets limited gains.
 The economy was still 3.2 percent smaller than a year
earlier, and the data was unlikely to persuade the central bank
to break its conditional pledge to keep the overnight interest
rate at a record low 0.25 percent at least until mid-2010.
 "Realistically, it's such a rock-solid commitment on rates
through to June of next year that today's data doesn't have
much meaningful influence," said Mark Chandler, fixed-income
strategist, RBC Capital Markets. "There's very little you could
piece into this that will say what will the economy look like
in the middle part of next year when they are ready to raise
 The September reading also provided a relatively robust
hand-off into the fourth quarter by expanding 0.4 percent on a
monthly basis from August.
 Now with Canada's recession declared finished, market
players turn to this Friday's Canadian and U.S. jobs reports
for November to measure the strength of the recovery.
 The Canadian report is expected to show the economy added
15,000 jobs after shedding 43,200 in October with an
unemployment rate of 8.7 percent, compared with October's 8.6
percent. ECONCA
 The two-year Canadian government bond CA2YT=RR was up 3
Canadian cents at C$100.29 to yield 1.103 percent, while the
10-year bond CA10YT=RR edged up 2 Canadian cents to C$104.27
to yield 3.224 percent.
 (Editing by Peter Galloway)
 ((; Reuters Messaging:; 416-941-8109))