CANADA FX DEBT-C$ rises on GDP data, bonds eye US jobs

Wed Mar 31, 2010 4:40pm EDT
 
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 * C$ ends at 98.44 U.S. cents, third straight day of gains
 * Canada posts strong economic growth in January
 * Bonds rise with U.S. Treasuries after ADP jobs report
 By Ka Yan Ng
 TORONTO, March 31 (Reuters) - The Canadian dollar rose for
a third straight session against the U.S. dollar on Wednesday
after data showed the economy grew at a faster than expected
clip in January.
 Canada's gross domestic product rose by 0.6 percent in
January from December, led by widespread gains in
manufacturing, as well as strong wholesale trade, construction,
retail sales and finance, Statistics Canada said. Analysts
polled by Reuters had expected month-on-month GDP growth of 0.5
percent. For more see [ID:nN31434455].
 "The January GDP print was just another piece in the long
line of solid 2010 data," said Sacha Tihanyi, currency
strategist at Scotia Capital, noting that the Canadian
currency's movement was choppy but in a very tight range.
 He said it was likely that liquidity will probably start
becoming a bit more strained ahead of the U.S. nonfarm payrolls
report for March on Friday, when Canada will be closed for the
Good Friday holiday.
 The currency rose as high as C$1.0125 to the U.S. dollar,
or 98.77 U.S. cents, then mirrored the volatility in the price
of oil, an important Canadian export whose direction sometimes
drives the currency.
 As crude settled higher, so did the Canadian dollar. [O/R]
 The Canadian dollar ended at C$1.0158 to the U.S. dollar,
or 98.44 U.S. cents, up from C$1.0195 or 98.09 U.S. cents at
Tuesday's close.
 The GDP data confirms economists' view that the economic
rebound is more robust than expected. After a stunning 5
percent annualized growth in the fourth quarter, most economic
data has been surprisingly strong.
 "What strikes me is how broad-based the recovery is, even
within manufacturing. It probably means it has staying power,"
said Sal Guatieri, senior economist at BMO Capital Markets.
 BONDS RISE ON U.S. JOBS CONCERN
 Canadian bond prices looked past the strong domestic GDP
figures and sided with U.S. Treasuries, whose prices rose in
response to a private sector employment report. [US/]
 The ADP National Employment Report showed a 23,000 drop in
private sector hirings in March. Analysts had predicted a
40,000 increase. For more see [ID:nWEN2273].
 This unexpected decline in private payrolls in March raised
concerns that the U.S. government's employment report this
Friday may be weaker than expected.
 The two-year government bond CA2YT=RR was up 1 Canadian
cent at C$99.56 to yield 1.734 percent, while the 10-year bond
CA10YT=RR jumped 8 Canadian cents to C$101.40 to yield 3.569
percent.
 Canadian bonds had a mixed performance against their U.S.
counterparts. The difference between 10-year yields narrowed by
1.1 basis points to 26.6 basis points.
 Overall, Canadian bonds have been under pressure as market
players increasingly price in the probability that the Bank of
Canada will hike interest rates in July.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)