January 11, 2011 / 11:03 PM / 9 years ago

CANADA FX DEBT-C$ buoyed by commodities, extends parity run

   * C$ higher at C$0.9897 to U.S. dollar, or $1.0104
 * Bond prices fall across curve
 * Focus on Europe, bond auctions, BoC statement next week  (Updates to close)
 By Solarina Ho
 TORONTO, Jan 11 (Reuters) -  The Canadian dollar strengthened against the U.S. currency on Tuesday, as higher commodity prices and a firmer euro increased investors’ risk appetite and helped extend the currency’s run above parity with the greenback.
 Oil, a key Canadian export, bounced back above $91 a barrel following supply disruptions on both sides of the Atlantic. Copper and gold also made gains, while stock markets rallied on optimism over the upcoming corporate earnings season. [MET/L] [GOL/] [O/R]
 “It’s fairly broadly consistent with what we’re seeing from other commodity producers,” said Mark Chandler, who heads RBC Capital Markets’ Canadian fixed income and currency strategy.
 The Canadian dollar CAD=D4 finished 0.35 percent higher at C$0.9897 to the U.S. dollar, or $1.0104, up from Monday’s North American finish of C$0.9932 to the U.S. dollar, or $1.0068, trading above parity for an eleventh straight session.
 The currency moved between C$0.9892 and C$0.9951 to the U.S. dollar, or $1.0109 and $1.0049 during the session.
 “It’s been a solid day ... Overall, what we’re seeing is there’s some risk on sentiment. Oil is higher, equities are higher, even the euro’s higher, so that’s all helped the Canadian dollar generally,” said Camilla Sutton, Chief Currency Strategist at Scotia Capital.
 The euro climbed on speculation European officials could raise the effective lending capacity of the region’s rescue fund and on talk of further Portuguese bond buying by the European Central Bank. [FRX/]
 “Canada’s managing to hold on to its gains from late last year, so it’s in a pretty good place ... The biggest risk to foreign exchange markets right now is what transpires in Europe,” Sutton said.
 With riskier assets in play, Canadian bond prices fell in tandem with U.S. Treasuries. [US/]
 The two-year bond CA2YT=RR was down 7.5 Canadian cent to yield 1.752 percent, while the 10-year bond CA10YT=RR slid 40 Canadian cents to yield 3.226 percent.
 Currency strategists have their eyes on bond auctions this week in Europe and North America and will also be parsing the Bank of Canada’s statement and Governor Mark Carney’s tone on Jan. 18 when the central bank next sets interest rates.
 “All eyes are very much focused on the bond market auctions that are coming up in the next two days and how that’s going to impact not only the euro but the other currencies generally,” said Sutton.
 In corporate issues, Canadian Imperial Bank of Commerce (CM.TO) sold C$1 billion ($1.01 billion) of five-year notes. [ID:nN11146222]  (Reporting by Solarina Ho)                                                      

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