July 15, 2009 / 7:13 PM / in 8 years

CANADA FX DEBT-C$ shoots to one-month high near 90 U.S. cents

 * C$ touches C$1.1117 to the U.S. dollar
 * Marks highest level in over a month
 * Some speculation of M&A-linked flows
 * Bond prices skid as equities get boost
 By Frank Pingue
 TORONTO, July 15 (Reuters) - Canada's currency vaulted to
its highest level in more than a month versus the U.S. dollar
on Wednesday, helped by improved hopes for a global economic
recovery and equity-market rally that fueled risk appetite.
 Late in Wednesday's session the Canadian dollar rose as
high as C$1.1117 to the U.S. dollar, or 89.95 U.S. cents. That
marked its highest level since June 12 and lifted it further
above the seven-week low it tumbled to last week.
 While the rise came alongside meaty gains in North American
equities and higher prices for major Canadian exports like oil
and gold, some market experts felt there could be more behind
the latest move in the domestic currency.
 "You have to guess that there is some deal going though,
whether it's an M&A related deal or whether it's a one-off or
something," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 "There's definitely been a little more force than just
equities rallying and the world being a safer place because
Canada has been such a monster outperformer this week."
 At 2:30 p.m. (1830 GMT), the Canadian unit was at C$1.1135
to the U.S. dollar, or 89.81 U.S. cents, up from C$1.1360 to
the U.S. dollar, or 88.03 U.S. cents, at Tuesday's close.
 That puts the domestic currency up 4.6 percent this week
over the Bank of Canada closing level provided on Friday.
 Also helping to buoy the Canadian dollar was increased
optimism about a global recovery after the U.S. Federal Reserve
said in minutes from its June meeting that the U.S. recession
was coming to an end. [ID:nWEQ001205]
 A healthy global economy would likely mean more demand for
the commodities that Canada is a key exporter of. Oil prices
were up 3 percent while gold hit a two-week high.
 The Canadian dollar shrugged off a report that showed
factory sales in Canada fell in May to the lowest level in
almost 11 years, putting the economy on track for a sharp
contraction in the second quarter. [ID:nN15446129]
 Earlier this week a pair of surveys from the Bank of Canada
showed businesses are more hopeful about their economic future
while lenders are tightening credit conditions at a lesser rate
than in previous quarters. The reports reinforce other data
suggesting the recession may have hit bottom. [ID:nN13381629]
 Canadian bond prices were lower across the curve as upbeat
corporate earnings out of the United States lent a bid to North
American stocks and sapped demand for more secure government
 The Toronto Stock Exchange's key index was up more than 2
percent, taking its cue from the bigger U.S. markets on the
heels on Tuesday's solid results and outlook from Intel Corp
INTC.O, [ID:nN14260734]
 The two-year Canada bond was down 4 Canadian cents at
C$99.99 to yield 1.255 percent, while the 10-year bond
retreated 60 Canadian cents to C$102.00 to yield 3.508
 The 30-year bond fell 85 Canadian cents to C$116.05 to
yield 4.035 percent. In the United States, the 30-year Treasury
bond yielded 4.456 percent.
 (Editing by Jeffrey Hodgson)

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