April 6, 2011 / 1:10 PM / 9 years ago

CANADA FX DEBT-C$ hits 3-year high on oil, economic health

 * C$ rises to C$0.9591, or $1.0426
 * Bond prices weaker across the board
 By Solarina Ho
 TORONTO, April 6 (Reuters) - The Canadian dollar powered to
a new three-year high against its U.S. counterpart on
Wednesday, underpinned by firm oil prices and the appeal of the
country's overall economic health.
 Expectations that the Bank of Canada will raise interest
rates in the coming months has also helped the currency's
 In contrast to Canada, it remained unclear when the U.S.
Federal Reserve will begin hiking interest rates, with
Tuesday's minutes from the latest Federal Open Market Committee
meeting showing Fed officials divided over the timing of an
exit from its ultra-easy monetary policy. [ID:nN14EDQUOT]
 "It's broadly higher commodities over the past few days.
There's also all the questions about monetary policy," said
Charles St-Arnaud, Canadian economist and currency strategist
in New York at Nomura Securities International.
 Brent crude traded above $122 a barrel, near 2-1/2-year
highs, while U.S. crude was steady above $108 a barrel, fueled
by ongoing turmoil in the oil-rich Middle East and North Africa
regions. U.S. dollar weakness ahead of Europe's central bank
rate decision on Thursday also provided strength. Oil, a key
Canadian export, has been a key driver for the commodity-linked
currency. [O/R]
 At 8:32 a.m. (1232 GMT), the currency CAD=D4 stood at
C$0.9591 to the U.S. dollar, or $1.0426, higher from
Wednesday's North American finish of C$0.9639 to the U.S.
dollar, or $1.0375. It hit a high over C$0.9584, or 1.0434
earlier in the session.
 In November 2007, the currency hit a high of C$0.9059 to
the U.S. dollar, or $1.1039.
 "The most important (driver) is the economy, because it's
leading to the other factors," said St-Arnaud, adding that
economic data is pointing to strong numbers in the first
quarter gross domestic product data.
 "One of the stories that's been really important in 2010
and continues to be important is actually we continue to see
inflows into Canadian markets," he said, noting that central
banks around the world are gradually shifting a small part of
their foreign exchange reserves from the U.S. dollar into
alternative currencies, such as the Canadian and Australian
 Merger and acquisition flows have also helped boost the
Canadian dollar.
 Record gold prices -- the bullion soared over $1,460 an
ounce  on Wednesday -- are also aiding the currency, with gold
another key Canadian resource. The price of the precious metal
climbed to new heights as the U.S. dollar slid and investors
demanded safe-haven assets. [GOL/]
 Canadian bond prices were weaker across the curve.
 The two-year bond CA2YT=RR was down 3.5 Canadian cents to
yield 1.884 percent, while the 10-year bond CA10YT=RR lost 12
Canadian cents to yield 3.398 percent.
  ( Editing by W Simon )

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