June 8, 2009 / 8:42 PM / 11 years ago

CANADA FX DEBT-C$ ticks higher, boosted by housing data

 * C$ finishes at 89.54 U.S. cents
 * Canadian housing starts rise in May
 * Bonds mostly lower; follow U.S. Treasuries
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, June 8 (Reuters) - The Canadian dollar rose
against the greenback on Monday, underpinned by Canadian
housing data that helped fan optimism the economy is set to
recover and by a move by Toronto equities off their early
 After falling as low as C$1.1291 to the U.S. dollar, or
88.57 U.S. cents, the currency finished up at C$1.1168 to the
U.S. dollar, or 89.54 U.S. cents. That's up slightly from
C$1.1190 to the U.S. dollar, or 89.37 U.S. cents, at the close
of Friday's session.
 "We are getting a little bit of traction from the better
than expected housing starts numbers," said Charmaine Buskas,
senior economics strategist at TD Securities.
 "It's just one data point so far but it does suggest that
at least in the month of May there was a little bit of upside
in the Canadian housing market not only in terms of the
headline number, but in terms of the composition."
 Canadian housing starts rose 9.2 percent in May and the
increase was broadly based, encompassing both single and
multiple segments, the Canada Mortgage and Housing Corp said.
 Also supporting the Canadian dollar was the late-day
bounce-back of Toronto's main stock market index from its sharp
drop in early trade, which suggested "a little bit appetite for
risk," Buskas said.
 The S&P/TSX composite index .GSPTSE closed down 20.17
points, or 0.19 percent, at 10,549.12 after dropping 1.8
percent right after the open.
 Matthew Strauss, senior currency strategist at RBC Capital
Markets, said the glow from better than expected U.S.
employment numbers on Friday [FRX/] was lingering in the
 "If we do see a recovery in the second half of the year
that will benefit Canada," Strauss said. "The news that is
positive for the U.S. dollar is indirectly positive for the
Canadian dollar."
 The greenback strengthened on speculation the U.S. Federal
Reserve may have to tighten interest rates sooner than
anticipated following Friday's U.S. jobs data, which showed far
fewer job losses than anticipated.
 Canadian bond prices were mostly lower, in line with the
U.S. Treasuries market, where yields spiked to seven-month
highs on speculation that the slowing rate of job losses in the
United States pointed to an economic recovery.
 That belief has led to fears that the Federal Reserve will
raise interest rates sooner than expected. [ID:nN08382300]
 "There's weakness from the U.S. Treasury market on early
speculation the Fed may tighten," said Sal Guatieri, senior
economist, BMO Capital Markets.
 The benchmark two-year government bond fell 28 Canadian
cents to C$99.68 to yield 1.415 percent, while the 10-year bond
fell 75 Canadian cents to C$101.85 to yield 3.528 percent.
 The 30-year bond dropped 55 Canadian cents to C$116.55 to
yield 4.010 percent. The comparable U.S. Treasury issue yielded
4.6432 percent.
 Canadian bonds mostly underperformed U.S. Treasuries across
the curve. The Canadian 30-year bond was about 63 basis points
below the U.S. 30-year yield, compared with about 66 basis
points below on Friday.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)

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