January 2, 2009 / 2:34 PM / 11 years ago

CANADA FX DEBT-Canadian dollar flat, bonds higher before ISM

 TORONTO, Jan 2 (Reuters) - The Canadian dollar was flat
against the U.S. dollar on Friday, while bond prices edged
higher, with thin volumes all around ahead of U.S.
manufacturing data.
 At 9:20 a.m. (1420 GMT), the Canadian dollar was at
C$1.2179 to the U.S. dollar, or 82.11 U.S. cents, nearly
unchanged from from Wednesday's close at C$1.2180 to the U.S.
dollar, or 82.10 U.S. cents. Canadian markets were closed on
Thursday for New Year's Day.
 The U.S. Institute of Supply management index for December
is expected to show U.S. factory activity dropped to 35.5 from
36.2 in November, according to the median forecast of
economists polled by Reuters.
 "We get the ISM which will be watched for a read on the
manufacturing sector. But markets will likely focus on the key
employment reports next week," said Paul Ferley, assistant
chief economist at Royal Bank of Canada.
 "Oil's down a bit. Again, markets are fairly thin. We'll
probably get a firmer indication of the underlying trend in the
currency when trading starts next week."
  The Canadian dollar slumped nearly 19 percent in 2008, its
worst annual drop versus the U.S. currency in more than half a
century as plunging commodity prices in the second half of the
year took their toll.
 But the decline came on the heels of an unusually strong
2007 performance against the greenback and the Canadian dollar
did rise against other currencies such as its commodity
cousins, the New Zealand and Australian dollars.
 Government bonds edged higher on Friday, resuming the
general trend that emerged last year as investors around the
world shunned risk amid a financial crisis and a worsening
global economy.
 There were no Canadian economic indicators on tap on
Friday, but direction may come from the ISM index. The December
statistics for employment in both Canada and the United States
will be closely watched after "fairly pronounced" drops in
November, Ferley said.
 The two-year Canada bond rose 3 Canadian cents to C$103.13
to yield 1.085 percent, while the 10-year bond gained 10
Canadian cents to C$113.00, yielding 2.676 percent.
 The yield spread between the two-year and 10-year bond was
159.1 basis points, versus 159 at the previous close.
 The 30-year bond climbed 40 Canadian cents to C$128.10 to
yield 3.441 percent. In the United States, the 30-year treasury
yielded 2.630 percent.
 (Reporting by Ka Yan Ng)

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