July 16, 2009 / 8:59 PM / 11 years ago

CANADA FX DEBT-C$ fades after three-day surge, bonds up

 * C$ slips 0.3 percent against the U.S. dollar to C$1.1172
 * Move follows three sessions of gains
 * Bonds rise on bargain-hunting, U.S. safe-haven bid
 By John McCrank
 TORONTO, July 16 (Reuters) - The Canadian dollar fell 0.3 percent versus the greenback on Thursday as investors pocketed some gains after a three-day rally, including a hefty surge in the previous session.
 The Canadian unit ended the North American session at C$1.1172 to the U.S. dollar, or 89.51 U.S. cents, down from C$1.1143 to the U.S. dollar, or 89.74 U.S. cents, on Wednesday.
 “Today’s pullback was just a little bit of profit-taking after the very aggressive rally we saw in the Canadian dollar yesterday,” said George Davis, chief technical strategist at RBC Capital Markets.
 The Canadian dollar raced to its highest level in more than a month on Wednesday, touching C$1.1117 to the U.S. dollar, or 89.95 U.S. cents.
 Davis said that the currency didn’t fall too far as equity markets, which act as a barometer of investor sentiment, rallied on strong earnings and economic data, fueling hopes that an economic recovery is under way.
 The price of U.S. crude oil CLc1 rose 48 cents to settle at $62.02 a barrel following a report that showed strong economic growth in China, the world’s second biggest energy consumer. [ID:nSYD542907]
 Canada is a major oil exporter and the strength in crude may have helped limit the Canadian dollar’s slide.
 Canadian bond prices rose across the curve as investors sought bargains after a three-day selloff of government debt. Bonds also benefited from a safe-haven bid due to concerns about the possible bankruptcy of CIT (CIT.N), a major U.S. lender.
 “We’ve had a pretty aggressive selloff in the past few days before this one and so I think we’re seeing a bit of tempering of that,” said Eric Lascelles, chief economic and rates strategist at TD Securities.
 In the United States, fears heightened about a bankruptcy at CIT after the lender said last-ditch bailout talks with the government had ended without a solution. [ID:nN16402649]
 That stoked anxiety about the company’s future, and about the thousands of small businesses it lends to, increasing investor demand for safe-haven government debt.
 There was no major Canadian economic data on Thursday. On Friday, Canada’s inflation report for the month of June will released. Analysts surveyed by Reuters forecast a 0.3 percent rise in the consumer price index — which reflects the cost of living — in June from May. But compared with June of 2008, the index is expected to fall 0.3 percent. [ID:nN15359147]
 The two-year bond rose 8 Canadian cents to C$100.09 to yield 1.204 percent, while the 10-year bond gained 55 Canadian cents to C$102.65 to yield 3.431 percent.
 The 30-year bond jumped C$1.15 to C$117.45 to yield 3.960 percent. In the United States, the 30-year Treasury bond yielded 4.4475 percent.
 Canadian bonds outperformed their U.S. counterparts, with the yield on the 10-year bond about 14.8 basis points below the U.S. 10-year yield, compared with about 4 basis points on Tuesday.  (Reporting by John McCrank; editing by Peter Galloway)                                                  

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