July 15, 2009 / 8:42 PM / 11 years ago

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  (Adds Bank of Canada closing level)
 By Frank Pingue
 TORONTO, July 15 (Reuters) - Canada’s currency vaulted to its highest level against the U.S. dollar in more than a month 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 by the 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.”
 The currency closed at C$1.1143 to the U.S. dollar, or 89.74 U.S. cents, well up from C$1.1360 to the U.S. dollar, or 88.03 U.S. cents, on Tuesday.
 That put the Canadian dollar up more than 4 percent this week over the Bank of Canada’s closing level on Friday.
 Also helping to buoy the currency was increased optimism about a global recovery after the U.S. Federal Reserve said in the 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 key Canadian export commodities. 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 debt.
 The Toronto Stock Exchange’s main index closed up more than 2 percent, taking its cue from the bigger U.S. markets on the heels on Tuesday’s solid results and the strong outlook from Intel Corp (INTC.O). .TO
 The two-year bond was down 4 Canadian cents at C$99.99 to yield 1.255 percent, while the 10-year bond retreated 65 Canadian cents to C$101.95 to yield 3.514 percent.
 The 30-year bond fell 84 Canadian cents to C$116.06 to yield 4.035 percent. In the United States, the 30-year Treasury bond yielded 4.51 percent.
 Canadian bonds outperformed their U.S. counterparts, with the yield on the 10-year bond about 10 basis points below the U.S. 10-year yield, compared with about 4 basis points on Tuesday.  (With additional reporting by Jeffrey Hodgson; editing by Rob Wilson)                                                  

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