Tuesday July 15, 2008 - 21:43:05 GMT
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Reuters - www.reuters.com
Forex Market Bews - Canada dollar closes at six-week high on soft US$
* Canadian dollar pops briefly above par with U.S. dollar
* Bank of Canada leaves key rate steady at 3.00 percent
* Bond prices end mostly higher as equities fall
By John McCrank
TORONTO, July 15 (Reuters) - The Canadian dollar closed at
a six-week high against the U.S. dollar on Tuesday after
briefly popping above parity with the greenback in overseas
trade before slipping back on economic concerns emanating from
the United States.
Canadian bond prices closed mostly higher, taking their cue
from falling stock markets and largely shrugging off the Bank
of Canada's decision to hold interest rates steady, which had
The Canadian dollar closed at C$1.0023, or 99.77 U.S.
cents, up from C$1.0052 to the U.S. dollar, or 99.48 U.S.
cents, at Monday's close.
During the overseas session, the currency rose as high as
US$1.0022, valuing a U.S. dollar at 99.78 Canadian cents, its
strongest level since June 3.
The push higher was mainly due to U.S. dollar weakness. The
greenback lost ground against a number of currencies as
investors second-guessed the U.S. government's plan to boost
confidence in the financial system.
U.S. Federal Reserve Chairman Ben Bernanke said in a speech
on Tuesday that restoring financial market stability was a top
priority for the central banks, adding that financial markets
and institutions remain under considerable stress.
Over the weekend the U.S. government introduced a package
to shore up Freddie Mac and Fannie Mae, the two largest U.S.
providers of mortgage funding.
The Canadian currency barely reacted to the Bank of
Canada's announcement that it would leave its key rate steady
at 3.00 percent. The bank pointed to risks coming from the soft
U.S. economy, but also said inflation could rise above 4
percent for the first time since 2003.
"I think they were fairly neutral, but at the same time,
there still seems to be a lot of overhang in the market of
worry and I certainly think that was emphasized," said Steve
Butler, director of foreign exchange at Scotia Capital.
The central bank's Monetary Policy Report Update and press
conference on Thursday will give more details on its assessment
of the economy.
BONDS MOSTLY HIGHER
Canadian bond prices ended mostly higher as sharp stock
market declines upped the demand for safe-haven government
debt, said Carlos Leitao, chief economist at Laurentian Bank of
The Toronto Stock Exchange's main index ended down 2.8
percent as energy stocks fell on softer oil prices and
financials were hit by economic concerns.
The two-year bond rose 11 Canadian cents to C$101.24 to
yield 3.062 percent. The 10-year bond climbed 25 Canadian cents
to C$104.70 to yield 3.677 percent.
The yield spread between the two-year and 10-year bond was
61.5 basis points, up from 58.9 basis points, unchanged from
the previous close.
The 30-year fell 26 Canadian cents to C$115.79 for a yield
of 4.065 percent. In the United States, the 30-year treasury
yielded 4.461 percent.
The three-month when-issued T-bill yielded 2.27 percent,
down from 2.31 percent at the previous close.
(Editing by Peter Galloway)
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