October 14, 2009 / 8:55 PM / 10 years ago

CANADA FX DEBT-C$ hits 14-month high, helped by oil, equity rise

 * C$ finishes at 97.48 U.S. cents
 * Touches highest level since early August 2008
 * Move driven by upbeat U.S. corporate results
 * Higher energy prices, equity market rally help
 * Bond prices lower across the curve
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, Oct 14 (Reuters) - The Canadian dollar zoomed to its highest level in just over 14 months on Wednesday as upbeat U.S. corporate results boosted investor optimism about a global recovery, whetting appetite for riskier assets.
 Reports this week from JPMorgan Chase & Co (JPM.N) and Intel Corp (INTC.O) contributed to a broad-based downturn in the U.S. dollar, as investors bought assets and currencies viewed as more geared to global economic growth. [FRX/]
 Investor sentiment was also boosted by U.S. retail sales data on Wednesday [ID:nN14236340], which helped to propel North American stock indexes higher. The Dow Jones industrials broke through the 10,000-mark for the first time in a year. [.TO] [.N]
 As well, the price of oil CLc1, a key Canadian export, hit a record high for the year above $75 a barrel. [O/R]
 “The move higher was supported by oil prices and continued risk appetite,” said Matthew Strauss, senior currency strategist at RBC Capital Markets.
 The Canadian currency CAD=D3 shot to C$1.0251 to the U.S. dollar, or 97.55 U.S. cents, its loftiest level since Aug. 1, 2008.
 The Canadian unit finished at C$1.0259 to the U.S. dollar, or 97.48 U.S. cents, up from C$1.0365 to the U.S. dollar, or 96.48 U.S. cents, at Tuesday’s close.
 All eyes will be on movements in the U.S. currency as investors await a string of U.S. data on Thursday including U.S. inflation numbers and weekly jobless claims, said Strauss. ECONUS
 “At this point, the U.S. dollar selloff is quite overextended from a technical perspective,” he said.
 But the Canadian dollar may not see huge movements for the remainder of the week, he added.
 “Even if there’s reason to rally further the market will probably be reluctant to push the Canadian dollar up to parity so close ahead of the Bank of Canada meeting,” said Strauss.
 The central bank, which holds its rate-setting meeting next week, has voiced concern about the currency’s stunning rally, which it fears will hurt exporters, endanger the tentative economic recovery, and cause inflation to undershoot the bank’s target.
 But market players are also skeptical about the Bank of Canada’s willingness to intervene to weaken the currency. [ID:nN13175489]
 Last week, Australia’s central bank hiked rates, making it the first of the Group of 20 central banks to raise interest rates as the global financial crisis eases.
 The move sparked speculation on which central bank will hike next, though the strong Canadian dollar makes the Bank of Canada less likely to follow. [ID:nN0965028]
 Canada’s central bank earlier this year chopped its key rate to a record low of 0.25 percent and pledged to keep it there until the middle of 2010.
 Domestic bond prices fell across the curve, tracking the move in the bigger U.S. Treasury market, with the move lower driven by the corporate results and economic data, said Eric Lascelles, chief economics and rates strategist at TD Securities.
 The two-year bond CA2YT=RR fell 5 Canadian cents to C$99.06 to yield 1.702 percent, while the 10-year bond CA10YT=RR sank 23 Canadian cents to C$101.77 to yield 3.530 percent.
 The Canadian market outperformed U.S. Treasury bonds, with the 10-year Canadian yield about 11 basis points above its U.S. counterpart, compared with around 16.4 basis points on Tuesday.  (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)                                                  

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