June 2, 2009 / 9:36 PM / 11 years ago

CANADA FX DEBT-C$ firms as strong data hits greenback

 * Canadian dollar rises 0.9 pct to 92.51 U.S. cents
 * Bonds higher across the curve
 By Cameron French
 TORONTO, June 2 (Reuters) - The Canadian dollar shot higher
against the U.S. currency on Tuesday as upbeat U.S. economic
data and early gains in stock markets spurred investors to sell
greenbacks in favor of higher-risk currencies such as the
Canadian dollar.
 The currency finished at C$1.0810 to the U.S. dollar, or
92.51 U.S. cents, up from C$1.0910 to the U.S. dollar, or 91.66
U.S. cents, at Monday's close.
 The Canadian dollar, which topped out at C$1.0789, or 92.69
U.S. cents, has risen for four straight sessions.
 George Davis, chief technical analyst at RBC Capital
Markets, said rising stock prices and strong economic data
convinced investors who had sought the relative safety of the
U.S. dollar during the worst of the economic crisis to reverse
their bets.
 Now, signs of an economic recovery are boosting the
Canadian dollar, whose fortunes are more closely tied to
resources such as oil and base metals.
 "Risk aversion is first and foremost in the minds of
investors, and people are generally taking their cues from the
equity markets," Davis said.
 "That backdrop, really since early March, has been a
positive for the Canadian dollar."
 U.S. stocks rose modestly on Tuesday, spurred by data
showing U.S. pending home sales rose 6.7 percent in April.
 Canadian stocks, which hit a seven-month high on Monday,
rose early on Tuesday before easing at the close.
 The main event for the currency this week will be the Bank
of Canada's interest-rate announcement on Thursday.
 The central bank is expected to leave interest rates
unchanged at 0.25 percent, in line with its conditional
commitment to keep rates low until middle of 2010.
 Despite the unlikelihood of a rate move, the bank's
statement could still have a big impact on the currency, said
Davis, as the bank could signal concern with the Canadian
dollar's rapid rise.
 "I think if they don't say anything (about it), it's going
to be a green light to keep buying Canada," he said.
 Canadian bond prices edged higher across the curve, moving
roughly in line with U.S. treasuries, which ended higher after
bargain-hunters rushed into buy on early weakness.
 The benchmark two-year government bond rose 8 Canadian
cents to C$100.05 to yield 1.227 percent, while the 10-year
bond gained 37 Canadian cents to C$102.77 to yield 3.420
 The 30-year bond rose 60 Canadian cents to C$116.55 to
yield 4.011 percent.
 (Reporting by Cameron French; editing by Rob Wilson)

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