November 4, 2010 / 12:37 PM / in 7 years

CANADA FX DEBT-C$ hits near 3-wk high, Potash weighs

 * C$ jumps to 99.87 U.S. cents, eye on parity
 * Bond prices little changed day after Fed launches QE
 * Canada blocks $39 billion BHP-Potash deal
 By Ka Yan Ng
 TORONTO, Nov 4 (Reuters) - The Canadian dollar rose to a near three-week high against the U.S. dollar on Thursday as risk appetite was whetted by the U.S. Federal Reserve’s plan to buy more U.S. government debt, but was undermined by Ottawa’s decision to block BHP Billiton’s bid for Potash Corp (POT.TO).
 The Canadian dollar, like most other major currencies, was on the rise as investors jettisoned the greenback after the Fed said on Wednesday that it would buy $600 billion more in U.S. Treasuries. [FRX/]
 But as Ottawa rejected BHP Billiton’s bid for Potash Corp late on Wednesday, the Canadian dollar snapped about 50 basis points lower to C$1.01 to the U.S. dollar. [ID:nN03272751]
 While it steadily recovered during the overseas session and hit its highest since Oct. 15 against the greenback, the Canadian dollar trailed on the crosses, except against the yen.
 “It’s lagging because of Potash,” said Jack Spitz, managing director of foreign exchange at National Bank Financial.
 “The decision with respect to Potash is not a positive story for the Canadian dollar...certainly from an immediate perspective.”
 Still, as riskier assets such as commodities and equity markets bask in the Fed’s asset buying plan, it will likely put a floor under any Canadian dollar weakness in the short term and keep parity with the greenback firmly in view, Spitz added.
 At 8:20 a.m. (1220 GMT), the Canadian dollar reached a session high at C$1.0013 to the U.S. dollar, or 99.87 U.S. cents, up from Wednesday’s close at C$1.0068 to the U.S. dollar, or 99.32 U.S. cents.
 Canadian government debt prices were steady the day after the Fed’s decision, with investors saying the Fed’s plan had already been priced in.
 The two-year bond CA2YT=RR was unchanged to yield 1.419 percent, while the 10-year bond CA0YT=RR was up 2 Canadian cents to yield 2.859 percent.
 The Fed’s debt purchase program was the marquee event in a crammed week of other notable concerns. Policy decisions from the European Central Bank and the Bank of Japan, as well as Canadian and U.S. jobs data for October are still to come over the remainder of the week.
 “There’s a lot of event and data risk still on the table,” said Spitz.
 (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)                                                      

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