By Frank Pingue
TORONTO, April 2 (Reuters) - The Canadian dollar rallied to its highest level since late last week versus the U.S. dollar on Wednesday as prices for key Canadian exports like oil and gold rebounded.
Domestic bond prices, with no Canadian economic data to consider, followed the bigger U.S. Treasury market lower across the curve after a surprise increase in U.S. private employment for March.
At 10:15 a.m. (1415 GMT), the Canadian unit was at C$1.0183 to the U.S. dollar, or 98.20 U.S. cents, up from C$1.0217 to the U.S. dollar, or 97.88 U.S. cents, at Tuesday’s close.
The bulk of the Canadian currency’s rise was pegged to a rally in oil prices above $101 a barrel and a rebound in gold prices from a two-month low on Tuesday.
Another support for the Canadian dollar was news earlier this week that some struggling financial firms shored up their balance sheets, viewed by many as a sign that the worst of the global credit crisis may be over.
“There seems to be a bit of a ‘buy North America’ trend under way. Sentiment toward the U.S. has certainly improved and there is a little less concern about the downside risks for the U.S. economy,” said Doug Porter, deputy chief economist at BMO Capital Markets.
“So there’s a sense that maybe the worst is behind us, and that sense could prove fleeting, but for now that seems to be the mood.”
A speech early on Wednesday by Bank of Canada Senior Deputy Governor Paul Jenkins did not affect the Canadian dollar as he rehashed comments the bank made last month when it cut interest rates.
The completion of Toronto-Dominion Bank’s (TD.TO) $7.7 billion cash and stock deal for New Jersey-based Commerce Bancorp earlier this week may also have removed some of the pressure from the Canadian dollar.
BONDS PINNED LOWER
Canadian bond prices were wedged lower as U.S. data showed that the U.S. private sector unexpectedly added jobs in March, which could bode well for the more important March jobs report due out of the United States on Friday.
The data on the private sector followed months of grim economic data out of the United States and offered a touch of optimism about the health of the U.S. economy.
The report weighed on bond prices in Canada where dealers are awaiting Canada’s jobs data for March, also due on Friday.
“It’s mostly in response to the better-than-expected ADP report we saw out of the U.S., which hints that Friday’s employment number might not be as negative as previously thought,” said Porter. “That’s crushed bonds again and to some extent that spilled over into Canada.”
The two-year bond was down 15 Canadian cents at C$102.23 to yield 2.862 percent. The 10-year bond dropped 24 Canadian cents to C$103.13 to yield 3.595 percent.
The yield spread between the two- and 10-year bonds was 73.1 basis points, down from 78.0 points at the previous close.
The 30-year bond fell 44 Canadian cents to C$116.14 to yield 4.051 percent. In the United States, the 30-year Treasury yielded 4.347 percent.
The three-month when-issued T-bill yielded 2.03 percent, unchanged from the previous close. (Editing by Janet Guttsman)