November 3, 2008 / 10:17 PM / 11 years ago

CANADA FX DEBT-Oversold C$ woos investors, rises 2 pct

 * Canadian dollar extends momentum from last week
 * Earlier slide to 4-year lows left currency oversold
 * Bonds little changed as market sentiment improves
 By Frank Pingue
 TORONTO, Nov 3 (Reuters) - The Canadian dollar closed 2
percent higher against the U.S. dollar on Monday as traders
felt the currency's steep October slide left it at more
attractive levels.
 Domestic bond prices were flat to slightly lower as dealers
avoided huge commitments until catching a glimpse of the key
Canadian employment data for October due on Friday.
 The Canadian dollar closed at C$1.1809 to the U.S. dollar,
or 84.68 U.S. cents, up from C$1.2045 to the U.S. dollar, or
83.02 U.S. cents, at Friday's close.
 The rise by the Canadian dollar came on the heels of a 11.6
percent slide in October, its biggest monthly drop ever, when
financial markets collapsed amid the financial crisis and fears
of a global recession.
 But many traders felt the currency's slide last week to its
lowest level in more than four years was overdone and that it
was looking attractive at current levels.
 "The Canadian dollar is markedly stronger than most of the
other currencies, so this was a case of people seeing value in
an oversold currency," said Sal Guatieri, senior economist at
BMO Capital Markets.
 "It reaffirms that we are seeing people seek out value in
these markets and they are buying things that were oversold in
the past month or two."
 The rally in the Canadian dollar came even as the price of
oil, a major Canadian export and one that often dictates the
currency's direction, fell nearly 6 percent on Monday because
of slumping demand.
 There is no Canadian economic data due until Thursday, when
September's building permits data and Ivey Purchasing Managers
Index for October are due out.
 The key report of the week comes on Friday when the October
jobs data is released. After an unexpected surge of 106,900 new
jobs in September, analysts surveyed by Reuters now expect a
decline of 10,000, and for the unemployment rate to rise to 6.2
percent from 6.1 percent.
 Bond prices ended flat on the short end of the curve and
turned a touch lower on the long end as dealers largely ignored
some weak U.S. economic data in favor of waiting for the more
important domestic jobs report due at the end of the week.
 Data from the United States showed the Institute for Supply
Management's index of national factory activity fell to its
weakest level since 1982 and helped boost prices south of the
border. But the sentiment did not spill over into Canada.
 "The worse than expected ISM reading supported the U.S.
treasuries market but didn't seem to have a big impact on our
market," said Guatieri. "People are waiting for the key
employment report due out later this week."
 The two-year bond rose 1 Canadian cent to C$101.49 to yield
2.012 percent. The 10-year bond dropped 35 Canadian cents to
C$103.55 to yield 3.803 percent.
 The yield spread between the two-year and the 10-year bond
was unchanged from the previous close at 173 basis points.
 The 30-year bond fell 35 Canadian cents to C$111.50 to
yield 4.297 percent. In the United States, the 30-year treasury
yielded 4.322 percent.
 (Reporting by Frank Pingue)

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