* Canadian dollar rises 0.5 percent vs greenback
* Bond prices rise with U.S. market on safe haven bid
By John McCrank
TORONTO, Sept 24 (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday as the greenback weakened and commodity prices firmed.
Canadian bond prices rose as investors sought less risky assets amid volatility in financial markets.
At 9:59 a.m. (1359 GMT), the Canadian dollar was up 0.5 percent versus the U.S. dollar at C$1.0315, or 96.95 U.S. cents, from C$1.0363, or 96.50 U.S. cents, at Tuesday’s close.
Concerns over the U.S. government’s $700 billion rescue package for the beleaguered financial sector, which is working its way through Congress, ended a slight U.S. dollar rally from the previous session.
Canada, meanwhile, is still seen as something of a safe haven, given that the stresses in its financial sector are much more limited than they are in the United States, said Adam Cole, head currency strategist at RBC Capital Markets in London.
“So Canada is moving up with the rest of the G10 when the (U.S.) dollar is being sold, but equally, when the (U.S.) dollar is rallying... it’s taking Canada with it, so it’s almost like a heads I win, tales you lose,” he said.
Also giving the Canadian dollar support were firmer commodity prices, as commodities make up over half of Canada’s exports.
U.S. crude oil CLc1 was up by more than $2 a barrel, around $109, while gold XAU= was nearing $900 an ounce.
Cole said the Canadian dollar will continue getting its direction from what happens in the U.S. market.
Developments on Wednesday included the U.S. Federal Reserve setting up currency swap lines with the central banks in Scandinavia and Australia in an attempt to boost short term U.S. dollar liquidity and drive down interbank lending rates. See [ID:nLO656400]
Canadian bond prices rose slightly, tracking the bigger moves of the U.S Treasuries market, as investors sought low risk assets amid the turmoil in financial markets.
Other than keeping an eye on the U.S. markets, Canadian investors will be looking forward to a speech by Bank of Canada Governor Mark Carney on Thursday on “Reflections on Recent Economic Developments,” said Michael Leavitt, fixed income strategist at MF Global Canada Co.
The two-year bond rose 4 Canadian cents to C$99.81 to yield 2.842 percent, while the 10-year bond added 13 Canadian cents to C$104.95 to yield 3.637 percent.
The yield spread between the two- and 10-year bond was 83.4 basis points, up from 78.8 basis points at the previous close.
The 30-year bond gained 20 Canadian cents to C$114.30 for a yield of 4.088 percent. In the United States, the 30-year treasury yielded 4.353 percent.
The three-month when-issued T-bill yielded 2.06 percent, down from 2.20 percent at the previous close. (Reporting by John McCrank; Editing by Peter Galloway)