CANADA FX DEBT-Merger news, data optimism boosts loonie nearly 1 pct

Wed Aug 27, 2014 4:35pm EDT
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* Canadian dollar at C$1.0855 or 92.12 U.S. cents
    * 10-yr bond yield lowest since May 2013

 (Adds market details, analyst quotes, updates prices)
    By Leah Schnurr
    TORONTO, Aug 27 (Reuters) - The Canadian dollar surged
nearly 1 percent against the greenback on Wednesday, rising to
its highest level in nearly a month as it benefited from
corporate takeover news and speculation that economic growth
data might come in stronger than expected at the end of the
    The sharp move gained steam through the session and sent the
currency pairing through short-term resistance around the C$1.09
area, as well as its 100- and 200-day moving averages.
    On Tuesday, Burger King Worldwide Inc said it plans
to buy Canada's Tim Hortons Inc in a C$12.64 billion
cash-and-stock deal. Such merger and acquisition activity can
boost demand for the loonie, as a foreign buyer would need to
pick up Canadian dollars to fund the deal. 
    "It seems there's quite a lot of speculation around M&A
flows," said Greg Moore, senior currency strategist at Royal
Bank of Canada in Toronto.
    "With this type of transaction, it's impossible to time when
those flows would happen, so a move like this is speculation
more than anything."
    The Canadian dollar ended the North American
session at C$1.0855 to the greenback, or 92.12 U.S. cents,
significantly stronger than Tuesday's close of C$1.0952, or
91.31 U.S. cents.
    The loonie also got some help from a broadly softer U.S.
dollar, which was down 0.2 percent against a basket of
    After a quiet economic calendar this week, investors are
also focusing increasingly on the gross domestic product report
due on Friday. The economy is forecast to pick up to a 2.7
percent rate of growth in the second quarter, bouncing back from
a slowdown in the first three months of the year. 
    Analysts said there is some risk that growth could
accelerate more than the market expects, which would be positive
for the loonie.
    Even so, it would be unlikely to cause the Bank of Canada to
alter its cautious tone when it releases its monetary policy
statement next week, said David Tulk, chief Canada macro
strategist at TD Securities in Toronto.
    "We've seen this from the bank time and time again; anything
that looks like it's either stronger than forecast or something
with a seemingly positive undertone, they are inclined to find
the dark cloud hanging somewhere out in the distance," Tulk
said. "That's their overarching strategy, just to sound as
cautious as they can." 
    Investors will also get a look at second-quarter current
account numbers on Thursday, though that is not expected to have
much impact on the market.
    Canadian government bond yields fell across the board, with
the yield on the benchmark 10-year at its lowest
level since May 2013 at 2.007 percent. The two-year 
was up half a Canadian cent in price to yield 1.103 percent.

 (Editing by Grant McCool)