April 4, 2011 / 9:09 PM / 9 years ago

CANADA FX DEBT-C$ slips from 3-yr highs, oil still supports

   * Finishes at C$0.9675 to US$, or $1.0336
 * Ends five-day rising streak
 * Bond prices pick up after several weak sessions
 * Canada businesses see inflation pressures growing  (Updates to close)
 TORONTO, April 4 (Reuters) - The Canadian dollar eased from three-year highs against the U.S. dollar on Monday, breaking a five-day rising streak, as market players mulled where next to take the commodity-linked currency.
 Backed by oil prices sitting at peaks not seen since 2008, the Canadian dollar CAD=D4 reached as high as C$0.9616 to the U.S. dollar, or $1.0400, its strongest level since November 2007. It later eased back below Friday’s close, where it spent most of the afternoon in a 20-point range.
 “Basically, markets are taking a break from the volatility we’ve seen in the last couple of weeks. But oil prices continue to provide strength and support in the short-term,” said Darren Richardson, corporate dealer at CanadianForex.
 The currency finished at C$0.9675 to the U.S. dollar, or $1.0336, down from Friday’s North American finish of C$0.9644 to the U.S. dollar, or $1.0369.
 Merger and acquisition activity also helped to buoy the currency. China’s Minmetals Resources (1208.HK), the country’s biggest metals trading firm, offered C$6.3 billion to buy Canadian-listed copper producer Equinox Minerals EQN.TO.
 The Bank of Canada’s first-quarter business outlook survey showed companies maintained a positive outlook on the economy, although sentiment on some forward-looking indicators, such as future sales growth, have eased from previous surveys.
 Mounting price pressures from rising energy and food costs are also expected to lift consumer inflation toward the upper end of the central bank’s comfort zone, the survey showed.
 This could push the central bank to raise its key interest rate by mid-year as it seeks to keep inflation at the center of its 1-3 percent target range.
 However, swap markets continue to maintain bets that there is almost no chance the central bank will raise rates in April. Odds of a May hike are also seen as low. The probability of a September rate hike is fully priced in. BOCWATCH
 Still, the currency’s technical picture remains somewhat uncertain, given that there are few notable levels for the currency between its current mark and its modern-day high of C$0.9059, or US$1.1039, reached in November 2007, according to Thomson Reuters dealing data.
 Canadian bond prices were higher across the curve, rising after a string of down sessions. There were few economic releases to provide direction, but market players were on guard for several U.S. Federal officials to speak in coming sessions, including Chairman Ben Bernanke on Monday night.
 Markets have been absorbing hawkish talk from some central bankers recently, which has brought forward expectations for when U.S. interest rates might be increased.
 Canada’s two-year bond CA2YT=RR rose 4 Canadian cents to yield 1.811 percent, while the 10-year bond CA10YT=RR rose 9 Canadian cents to yield 3.356 percent.  (Reporting by Ka Yan Ng; editing by Rob Wilson)                                                      

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