February 1, 2010 / 5:15 PM / 10 years ago

CANADA FX DEBT-Canadian dollar up as stocks, commodities rise

 * C$ higher at 93.88 U.S. cents
 * Recovers from six-week low hit overnight
 * Briefly pared gains after ISM data boosted greenback
 * Bonds hit by strong U.S. data, Canada outperforms
 By Claire Sibonney
 TORONTO, Feb 1 (Reuters) - The Canadian dollar gained
strength on Monday, rising off a six-week low against the U.S.
dollar in the overnight session, helped by a rise in risk
appetite that boosted commodity and equity markets.
 The Canadian dollar briefly pared gains after key data that
showed the U.S. manufacturing sector continued to expand in
January, but it quickly resumed its strengthening trend.
 "Risk aversion levels are decreasing with the stock market
rallying and so that has boosted commodities and we're seeing
the U.S. dollar weaker across the board on the back of that,"
said George Davis, chief technical strategist at RBC Capital
 "We did see a little bit of a shorter term recovery in the
U.S. dollar after the release of that (manufacturing) number
but I don't think it's been substantial or significant enough
to really reverse the trends we have seen going into the
beginning of today," added Davis.
 At noon (1700 GMT), the Canadian dollar was at C$1.0652 to
the U.S. dollar, or 93.88 U.S. cents, up from C$1.0693 to the
U.S. dollar, or 93.52 U.S. cents, at Friday's close.
 Overnight, the currency weakened to C$1.0722 to the U.S.
dollar, or 93.27 U.S. cents, its weakest since Dec. 18. But it
edged off that low as U.S. and Canadian stocks rose and the
price of oil firmed, showing risk appetite is on the rise.
 Gold also extended gains towards $1,090 an ounce as the
U.S. dollar declined further versus the euro after euro zone
manufacturing data beat expectations, boosting interest in the
metal as an alternative asset. [GOL/]
 "Going forward it's going to depend on what equity markets
do from here. If the rally continues to build I think we'll
continue to see the Canadian dollar strengthen and vice versa,"
said Davis.
 The data calendar for Canada is empty until Thursday when
data for building permits for December and a gauge of
purchasing activity for January are due. But the main focus
will be on Friday when market players look for further evidence
of an economic recovery in the Canadian and U.S. jobs data.
 Canadian bonds were lower, sliding alongside their U.S.
counterparts after the strong manufacturing data boosted
riskier assets.
 "They've generally been under some pressure," said Davis.
 "We started to see some signs of faltering late last week
in the rally and we've continued to see that fall through today
on the back of the stronger ISM numbers."
 The two-year bond CA2YT=RR edged 3 Canadians cents lower
to C$100.31 to yield 1.35 percent, while the 10-year bond
CA10YT=RR fell 26 Canadian cents to C$102.88 to yield 3.39
 Canadian government bonds outperformed U.S. Treasuries
across the curve, with the yield on the Canadian 10-year bond
27 basis points below its U.S. counterpart, compared with 24
basis points on Friday.
 (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)

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