August 28, 2008 / 2:30 PM / 12 years ago

Canadian dollar inches higher as oil prices firm

 * Gustav nears oil installations in the U.S. Gulf
 * Bond prices mostly lower on firm U.S. GDP data
 By John McCrank
 TORONTO, Aug 28 (Reuters) - The Canadian dollar was
slightly higher against the U.S. dollar on Thursday, as the
price of oil briefly rose above $120 a barrel and remained well
bid on fears that Tropical Storm Gustav would damage oil and
gas platforms in the U.S. Gulf.
 Domestic bond prices fell along with the larger U.S. market
after data was released showing U.S. economic growth for the
second quarter was revised sharply higher.
 At 10:00 a.m. (1400 GMT), the Canadian dollar was at
C$1.0464 to the U.S. dollar, or 95.57 U.S. cents, up from
C$1.0468, or 95.53 U.S. cents, at Wednesday's close.
 The currency had risen to C$1.0432 to the greenback, or
95.86 U.S. cents earlier in the session.
 The Canadian dollar has been linked increasingly to oil
prices as the country's prominence as an energy producer has
grown. Canada's oil sands contain the biggest deposit of crude
outside the Middle East.
 The price of U.S. crude oil CLc1 rose on forecasts that
Tropical Storm Gustav would regain hurricane status as it
approaches the U.S. Gulf, home to a quarter of U.S. oil
production. See [ID:nSP204802]
 The storm is expected to hit the U.S. Gulf around Monday,
and would be the first major hurricane to threaten U.S. energy
installations since Hurricanes Katrina and Rita in 2005.
 Data on Thursday showed that high prices for energy exports
boosted Canada's current account surplus in the second quarter
to C$6.76 billion ($6.44 billion) from C$4.46 billion in the
first quarter. See [ID;nN28257696]
 The increase fell short of market expectations of a surplus
of C$8.0 billion, held back by growing deficits in services and
investment income.
 Canada's main economic report for the week comes Friday
with the gross domestic product for the second quarter.
 "Our sense is if the figure surprises, it may be on the
down-side," said Sal Guatieri, senior economist at BMO Capital
 "If that's the case, the Canadian dollar would weaken
because speculation of a Bank of Canada rate cut would build,"
he said.
 Analysts, on average, expect second-quarter GDP to come in
at 0.7 percent, according to a Reuters poll.
 In the first quarter, the economy shrank by an annualized
0.3 percent. The technical definition of a recession is two
back-to-back negative quarters.
 The GDP figure is the last major piece of data before the
Bank of Canada announces its interest rate decision Sept. 3.
 Canadian bond prices were mostly weaker, along with the
larger U.S. market, on a sharp upward revision to U.S. GDP for
the second quarter, said Guatieri.
 U.S GDP was revised to a 3.3 annual rate for the quarter,
up from 1.9 percent in the initial estimate a month ago.
 The two-year bond added 1 Canadian cent to C$100.00 to
yield 2.750 percent. The 10-year dropped 22 Canadian cents to
C$105.70 to yield 3.552 percent.
 The yield spread between the two-year and 10-year bond was
79.5 basis points, down from 80.4 at the previous close.
 The 30-year bond fell 43 Canadian cents to C$116.37 for a
yield of 4.032 percent. In the United States, the 30-year
treasury yielded 4.406 percent.
 The three-month when-issued T-bill yielded 2.45 percent
unchanged from the previous close.
 (Editing by Scott Anderson)

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