November 17, 2008 / 10:13 PM / in 11 years

CANADA FX DEBT-Canadian dollar, bonds rise on weak data

 * C$ rises 0.2 percent, reverses early losses
 * Bonds up on weak data from U.S., Japan
 By Cameron French
 TORONTO, Nov 17 (Reuters) - The Canadian dollar ended
higher against the U.S. currency on Monday, rebounding from
morning lows as the greenback retreated broadly following weak
U.S. manufacturing data.
 Canadian bond prices rose alongside U.S. treasuries as the
weak U.S. manufacturing data and gloomy economic news from
Japan fueled fears of a global recession, driving safe-haven
buying of government debt.
 The currency ended the session at C$1.2232 to the U.S.
dollar, or 81.75 U.S. cents, up from C$1.2255 to the U.S.
dollar, or 81.60 U.S. cents, at Friday's close.
 The Canadian dollar moved in a wide range of 80.87 U.S.
cents to 82.49 U.S. cents, ending higher despite crude oil
prices that fell below $55 a barrel, down more than 3 percent
 "There's just no follow-through one way or the other. It's
still very much flow driven," said Shaun Osborne, chief
currency strategist at TD Securities.
 "I think it's just a reflection of the general U.S. dollar
trend here."
 The greenback weakened as a report showed the New York
Federal Reserve's gauge of manufacturing in the region fell to
a record low in November [ID:nN17448701].
 Osborne said market players are watching the Canadian
currency's daily ranges, rather than its short-term moves, and
attributed the wide swings on Monday to generally illiquid
 The currency typically moves roughly in line with oil, gas
and metal prices, due to Canada's vast resources.
 But the financial crisis has prompted investors to embrace
the U.S. dollar's liquidity and general safe-haven status,
putting resource-driven currencies on the defensive.
 Until there are clear signs of credit conditions improving
and financial flows returning to normal, the Canadian dollar
will continue to be under pressure, analysts said.
 "On balance it still feels like the risk is we can drift
weaker," said Shane Enright, currency strategist at CIBC World
 Canadian bond prices rallied alongside the larger U.S. debt
market on the gloomy manufacturing news, as well as data
showing Japan's economy shrank 0.1 percent in the third
quarter, sending the world's second-biggest economy into its
first recession in seven years.
   The Canadian overnight Libor rate LIBOR01 was 2.5000
percent, up from 2.4667 percent on Friday.
 Friday's CORRA rate CORRA= was 2.2425 percent, down
slightly from 2.2460 percent on Thursday. The Bank of Canada
publishes the previous day's rate at around 9 a.m. daily.
 The two-year bond gained 3 Canadian cents to C$101.71 to
yield 1.891 percent. The 10-year bond climbed 58 Canadian cents
to C$105.48 to yield 3.566 percent.
 The yield spread between the two- and 10-year bond was 182
basis points, up from 173.1 at the previous close.
 The 30-year bond added C$1.35 to C$114.15 to yield 4.149
percent. In the United States, the 30-year treasury yielded
4.189 percent.
 (Reporting by Cameron French; editing by Rob Wilson)

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