July 14, 2009 / 8:56 PM / in 11 years

CANADA FX DEBT-C$ touches 3-week high as equities rally

 * C$ finishes at C$1.1360 to the U.S. dollar
 * Touches highest level since June 22
 * Bond prices lower across curve, follow U.S. Treasuries  (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, July 14 (Reuters) - Canada’s dollar shot to its highest level against the U.S. currency in three weeks on Tuesday as strong earnings at Goldman Sachs encouraged stock markets and lured investors toward greater risk.
 The Canadian dollar rose as high as C$1.1343 to the U.S. dollar, or 88.16 U.S. cents, its highest level since June 22.
 But it backed off that mark slightly to finish at C$1.1360 to the U.S. dollar, or 88.03 U.S. cents, up for a second straight session, and comfortably higher than Monday’s closing level of C$1.1518 to the U.S. dollar, or 86.82 U.S. cents.
 “I think it just seems like an overall optimistic feeling of what’s going on with Q2 earnings and the fact that equity markets are posting small gains,” said Jean-Philippe Blais, vice president foreign exchange products at BMO Capital Markets.
 Quarterly earnings at Goldman Sachs Group Inc (GS.N), seen as a bellwether for the financial sector, soared on trading results [ID:nN14289399], helping equities higher on Tuesday and spurring risk sentiment for the Canadian dollar.
 “Technical plays” helped also, Blais said.
 “Both yesterday and today in late morning we ran into stops where people were caught long dollar/Canada, so Canada seems to be doing well,” he said.
  The currency also drew strength from a rise in prices for gold [ID:nN14559168], a mainstay of the Canadian mining industry. Oil prices helped support the currency for most of the day before settling slightly lower on demand concerns. [ID:nSYD465576]
  The greenback struggled against most major currencies on Tuesday as investors flocked to higher-yielding assets. [FRX/]
 Housing data that showed sales of existing homes in Canada rose sharply in the second quarter from the first was another factor giving the Canadian dollar support. [ID:nN14267126]
 Canadian bond prices were lower across the curve as money moved out of safe-haven assets and into stocks, said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment.
 “The risk markets are fairly healthy,” he said, noting the housing data helped to improve risk appetite.
 The Canadian market also trailed the bigger U.S. Treasury market, where prices fell on profit-taking and a rosier outlook for some financial companies. [ID:nN14419075]
 The two-year Canada bond was down 6 Canadian cents at C$100.07 to yield 1.214 percent, while the 10-year bond retreated 85 Canadian cents to C$102.70 to yield 3.425 percent.
 The 30-year bond fell C$1.45 to C$117.10 to yield 3.979 percent. In the United States, the 30-year Treasury yielded 4.3512 percent.
 The Canadian 30-year bond was 37 basis points below the U.S. 30-year yield, compared with about 34 basis points below on Monday.  (Reporting by Jennifer Kwan; editing by Peter Galloway)                                                  

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