August 25, 2011 / 2:12 PM / 9 years ago

CANADA FX DEBT-C$ shoots to one-week high on Buffett news

   * C$ rises to C$0.9811 to the U.S. dollar, or $1.0193
 * Bonds mixed
 By Ka Yan Ng
 TORONTO, Aug 25 (Reuters) - The Canadian dollar rose on Thursday morning against a broadly weakening U.S. currency as market sentiment shot up on news that Warren Buffett’s conglomerate Berkshire Hathaway (BRKa.N) will invest $5 billion in Bank of America (BAC.N).
 The move may shore up the company in the same way as Buffett helped prop up Goldman Sachs (GS.N) during the financial crisis. Investors immediately sent the euro rallying from its New York session low against the greenback, and other riskier currencies, including the Canadian dollar, were swept higher. For more see [ID:nN1E77O0ET] [FRX/]
 A build-up to U.S. Federal Reserve Chairman Ben Bernanke’s speech this Friday has kept the Canadian currency locked in a tight range. But the Berkshire Hathaway news jolted it as high as C$0.9791 to the U.S. dollar, or $1.02, its highest level in more than a week.
 At 9:50 a.m. (1350 GMT), the Canadian currency CAD=D4 was at C$0.9811 to the U.S. dollar, or $1.0193, up from C$0.9866 to the U.S. dollar, or $1.0136, at Wednesday’s close.
 The main event of the week remains Bernanke’s speech on Friday, however.
 While investors were optimistic that he would signal the Fed is committed to take further measures if necessary to support the U.S. economy, many doubted that he would use his speech to launch a third round of quantitative easing.
 “I’m guessing a lot of people are in for disappointment. I don’t think there will be any major signal into a shift of policy,” said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York.
 Investors expect Bernanke to stress that the Fed still has tools to support the U.S. economy, whose health is critical for Canada.
 St-Arnaud said the Canadian economy is in a “rough patch” but should recover enough for the Bank of Canada to raise interest hike rates, though at a slower pace given the Fed’s pledge to keep its rates low until 2013.
 “With all the uncertainty, the Bank of Canada will probably be more willing to wait until January before hiking. But the next move for them is a hike. There are still some rate cuts priced into the market,” St-Arnaud said.
 Canadian government bonds were mixed. The two-year bond CA2YT=RR fell 3 Canadian cents to yield 1.015 percent, while the 10-year bond CA10YT=RR edged up 30 Canadian cents to yield 2.431 percent.  (Reporting by Ka Yan Ng; editing by Peter Galloway)                            

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