August 20, 2009 / 9:22 PM / in 11 years

CANADA FX DEBT-C$ ends higher for third straight session

 * Closes at C$1.0873 to US$, or 91.97 U.S. cents
 * C$ hits highest level since Aug. 14
 * Goldman Sachs says short US$ versus C$
 * Bond prices ends session flat
 (Updates to session close)
 By Frank Pingue
 TORONTO, Aug 20 (Reuters) - Canada's dollar hit its highest
level in nearly a week on Thursday en route to its third
straight higher close versus the U.S. currency as hopes that
the global economy was on the mend boosted risk appetite.
 The currency's rise followed a rebound in Chinese and North
American equities, which helped lift investors' spirits and
weigh on a low-yielding greenback, which usually falls when
markets grow more optimistic and exit the perceived safety of
the U.S. dollar.
 "Stocks and risk sentiment has modestly improved but the
Canadian dollar has really outperformed all the other majors,"
said Tyson Wright, senior foreign exchange trader at Custom
House, a currency services firm in British Columbia.
 "It seems the move was a little exaggerated obviously
because Canada outperformed and our data over the last week
hasn't been that positive."
 The Canadian dollar rallied as high as C$1.0864 to the U.S.
dollar, or 92.05 U.S. cents, which marked its highest level
since Aug. 14. It backed off a touch but still managed to end
the session higher.
 It ended at C$1.0873 to the U.S. dollar, or 91.97 U.S.
cents, up from C$1.0956 to the U.S. dollar, or 91.27 U.S.
cents, at Wednesday's close.
 The move higher came as Goldman Sachs said now is a good
time to short the U.S. dollar versus the Canadian currency,
given its ties to the price of oil, which have rebounded of
recent lows. [ID:nN20528836]
 Wright said the currency's latest rise was likely
exaggerated, given thin liquidity, but noted that its move will
likely be contained around the C$1.08 area.
 The latest Canadian data showed wholesale trade rose for
the first time in nine months in June, up 0.6 percent from May
on higher sales of automotive products. [ID:nN20510314]
 That data came a day after a report showed consumer prices
in Canada fell at the steepest rate in 56 years in July due to
a sharp decline in energy costs. [ID:nN19463312]
 Canadian bond prices finished flat across the curve,
tracking a move in the bigger U.S. Treasury market after weak
U.S. labor data offset a surprise rise in regional
 A U.S. report showed manufacturing in the mid-Atlantic
region turned positive in August, ending a 10-month contraction
on the back of a jump in new orders. [ID:nN20513029]
 The report charted an improvement in manufacturing but a
separate report from the U.S. Labor Department underscored the
fragile state of the jobs market and kept dealers hanging on to
more secure assets.
 The two-year Canadian bond ended up 5 Canadian cents at
C$99.50 to yield 1.251 percent, while the 10-year bond rose 15
Canadian cents to C$102.97 to yield 3.389 percent.
 The 30-year bond rose 26 Canadian cents to C$118.71 to
yield 3.891.
 Canadian bonds underperformed their U.S. counterparts
across the long end of the curve. The Canadian 30-year bond was
34.1 basis points below the U.S. 30-year yield, versus 38.2
basis points on Wednesday.
 (Editing by Rob Wilson)

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