April 7, 2010 / 10:51 PM / 7 years ago

Loonie pierces parity for second day but falls back

TORONTO (Reuters) - The Canadian dollar pushed through parity against the greenback for a second day on Wednesday, nearing a 21-month high, but then fell back sharply as oil prices fell and risk appetite dried up.

The Canadian dollar touched a low of C$1.0058 to the U.S. dollar, or 99.42 U.S. cents, its descent deepening as oil prices retreated after six sessions of gains and as euro zone worries persisted.

Canadian building permits data for February came in weaker than the market had forecast, also pressuring the currency. Building permits, a barometer of future construction activity, slid 0.5 percent in the month to C$5.7 billion versus market expectations of a 2 percent gain.

However, the Ivey purchasing activity index for March jumped more than expected.

Early in the day the currency drove as high as C$0.9977, or US$1.0023, its highest intraday level since July 15, 2008.

“Overnight, the Canadian dollar thrust its way through parity a few times but ultimately it’s softened up and is just below the threshold for now,” said Eric Lascelles, chief economics and rates strategist at TD Securities.

“It seems to be a day more broadly in which risk has been taken off the table around the world.”

The Canadian dollar finished at C$1.0051 to the U.S. dollar, or 99.49 U.S. cents, down from Tuesday’s close of C$1.0012 to the U.S. dollar, or 99.88 U.S. cents.

“We continue to hug parity but there is no conviction at this point in time to really take it (dollar/Canada) much lower,” said Matthew Strauss, senior currency strategist at RBC Capital Markets.

Stock markets around the world fell on Wednesday as worries about Greece’s fiscal woes brewed and investors paused after a recent runup in prices.

The next major Canadian economic report will be employment data for March, due for release on Friday. The median forecast of 19 analysts is for a net gain of 25,000 jobs, slightly more than the 20,900 jobs added in February. None of the analysts expected job losses, with forecasts for creation ranging from 5,000 to 45,000.

BOND PRICES CLIMB

Canadian bond prices were higher across the curve in tandem with the U.S. Treasury market in a flight to safety move. Prices also got a boost after strong auctions on both sides of the border.

U.S. Treasuries gained after record-setting demand for a $21 billion auction of 10-year notes, which eased concerns over weakening demand for government securities.

The government of Canada’s C$3 billion auction of two-year bonds met with better than expected demand for a non-benchmark issue.

The two-year government bond was up 12 Canadian cents at C$99.47 to yield 1.7888 percent, while the 30-year bond gained 68 Canadian cents to C$115.08 to yield 4.076 percent.

Canadian government bonds mostly underperformed U.S. issues, with the Canadian 30-year yield 67.5 basis points below its U.S. counterpart, compared with around 72 basis points the previous session.

Additional reporting by Ka Yan Ng and Claire Sibonney; editing by Peter Galloway

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