By Frank Pingue
TORONTO, Dec 28 (Reuters) - The Canadian dollar rose for
the second straight week against the U.S. currency on Friday,
but a bout of profit-taking yanked it back from the five-week
high it hit earlier in the session.
Domestic bond prices, with no Canadian data to digest until
later next week, followed the U.S. market to a higher close as
recent data upped the possibility for a U.S. Federal Reserve
rate cut next month.
The Canadian dollar closed at US$1.0198, valuing each U.S.
dollar at 98.05 Canadian cents, up from Thursday's close of
US$1.0183, or 98.20 Canadian cents per U.S. dollar.
Early in the session the Canadian dollar hit US$1.0250,
which marked its highest level since Nov. 20 and gave it a gain
of about 4.8 percent over the past two weeks.
But the currency spent most of the last half of the North
American session moving lower as traders pocketed a portion of
the recent gains ahead of the weekend.
"I think obviously momentum is absent over the holiday
period," said Gareth Sylvester, senior currency strategist at
HIFX Plc in San Francisco.
"It's just really a case of some short-term positions being
closed and a bit of profit-taking ahead of the broken start to
the first week of January."
Monday is the last trading day of 2007 as financial markets
will close Tuesday for New Year's Day and reopen on Wednesday.
The early rise in the Canadian dollar was mainly a carry
over from Thursday when commodity prices appreciated, a
positive for the currency, on news that Pakistani opposition
leader Benazir Bhutto had been assassinated.
In September, the Canadian dollar pushed past parity with
the U.S. dollar for the first time since 1976. It hit a
modern-day high of US$1.1039 in November before sliding back.
Canadian bond prices were higher across the curve as
dealers took their cue from the U.S. market, given the lack of
any domestic data to influence trade.
Helping support the desire for bonds was data that showed
sales of new single-family U.S. homes fell much more than
expected in November.
That came on the heels of data on Thursday that showed weak
durable goods orders in November as well as an unexpected drop
in jobless claims last week. The reports upped the chances of a
Federal Reserve rate cut next month.
The Canadian economic calendar is empty until the release
of the industrial product price and raw materials price indexes
for November on Jan. 4.
The two-year bond rose 14 Canadian cents to C$100.87 to
yield 3.771 percent. The 10-year bond was up 59 Canadian cents
at C$99.91 to yield 4.011 percent.
The yield spread between the two-year and 10-year bond was
24.0 basis points, up from 23.7 basis points at the previous
The 30-year bond rose C$1.17 to C$115.24 to yield 4.103
percent. In the United States, the 30-year treasury yielded
The three-month when-issued T-bill yielded 3.87 percent,
down from 3.90 percent at the previous close.