July 27, 2009 / 9:08 PM / in 8 years

Dollar climbs to highest level since October

TORONTO (Reuters) - The Canadian dollar rose to its highest level versus the U.S. dollar in nearly 10 months on Monday as investor appetite for riskier assets boosted the currency.

The Canadian dollar rose as high as C$1.0778 to the U.S. dollar, or 92.78 U.S. cents, its highest level since early October.

It backed off slightly to finish at C$1.0811 to the U.S. dollar, or 92.50 U.S. cents, up from C$1.0829 to the U.S. dollar, or 92.34 U.S. cents, at Friday’s close.

“Overall, sentiment is still fairly positive with respect to equities and commodities,” said George Davis, chief technical strategist at RBC Capital Markets.

A lackluster performance on U.S. stock markets prevented the Canadian currency from staying under the C$1.0800 level, Davis said. Stock market direction is often seen as a barometer of investor risk tolerance.

Toronto’s main stock index closed higher as financials rose on economic recovery hopes, while U.S. stocks managed to eke out small gains late in the session.

The rise in the Canadian dollar on Monday followed its 3-percent climb last week and came alongside rallies in commodity-linked currencies such as the Australian dollar.

Also supporting the currency was the price of oil, a key Canadian export, which rose to settle above $68 a barrel.

Economic data due this week includes Canadian gross domestic product for May and U.S. consumer confidence and second-quarter gross domestic product.

“We need to see some good data to keep the stock market happy,” said Steve Butler, director of foreign exchange trading at Scotia Capital.

“When the stock market is happy the risk is on.”

BOND PRICES LOWER

Canadian bond prices were lower across the curve, largely following the bigger U.S. Treasury market, where debt prices fell on Monday on supply concerns as the Treasury is set to auction a record $115 billion in new debt this week.

“It’ll all be about how well they’re received,” Butler said.

With no domestic data due out until later in the week, Canadian bond prices will likely take their direction from the bigger U.S. Treasury market and from equities.

The two-year Canada bond was down 2 Canadian cents at C$99.84 to yield 1.340 percent, while the 10-year bond sagged 18 Canadian cents to C$101.45 to yield 3.573 percent.

The 30-year bond retreated 35 Canadian cents to C$115.30 to yield 4.075 percent. In the United States, the 30-year Treasury yielded 4.6286 percent.

Canadian bonds mostly outperformed U.S. Treasuries across the curve. The Canadian 30-year bond was 55 basis points below the U.S. 30-year yield, compared with about 49 basis points below on Friday.

Reporting by Jennifer Kwan; editing by Peter Galloway

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