Friday August 15, 2008 - 20:52:38 GMT
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Reuters - www.reuters.com
Forex Market News - Canadian dollar rises on manufacturing, bonds up
By Lynne Olver
TORONTO (Reuters) - Stronger-than-expected manufacturing
figures helped lift the Canadian dollar against the U.S. dollar
on Friday, while bond prices took their cue from a rising U.S.
The Canadian dollar closed at C$1.0590 to the U.S. dollar,
or 94.43 U.S. cents, up from C$1.0633 to the U.S. dollar, or
94.05 U.S. cents, at Thursday's close.
The U.S. dollar rallied against many major currencies
overnight, including the Canadian dollar.
But that changed when morning data showed Canadian
manufacturing sales rose by 2.1 percent in June from May --
more than double the market's expectation.
The currency jumped to C$1.0585 to the U.S. dollar, or
94.47 U.S. cents, immediately after the data release, and
despite a midday pullback, it wound up hanging on to most of
"The data seems to have had a pretty profound impact on the
Canadian dollar, the currency is really rallying in stark
contrast to the trend we've seen over the last few weeks," said
Eric Lascelles, economics and rates strategist at TD
"I have to say I'm a little bit surprised that it's managed
to completely outweigh the softness in commodity prices, but it
simply seems that some days commodity prices don't win,"
The strength in manufacturing, which directly accounts for
about one-fifth of all economic activity, topped expectations
of a 1 percent rise in sales, but some economists sounded a
"Today's report is marginally encouraging to us, but we
think it is not plausible that Canada's manufacturing sector
can grow sustainably with U.S. domestic demand contracting,
Canadian domestic demand weakening and the CAD (Canadian
dollar) still relatively strong," Merrill Lynch Canada
economist David Wolf wrote in a research note.
Most of the June headline gain came from higher prices as
refined energy and primary metal products are included, Wolf
Next week, market watchers will get to pore over the June
wholesale trade report on Tuesday, June retail sales data on
Wednesday, and the July consumer price index on Thursday.
These reports could tweak expectations about the Bank of
Canada's remaining 2008 interest-rate decisions. Its last three
policy announcement dates this year are September 3, October 21
and Dec 9.
BOND PRICES INCH HIGHER
Canadian bond prices rose slightly across the yield curve.
"You have a moderate rally in the U.S. and Canada is
tracking that, but it's underperforming on the strong Canadian
economic data," Lascelles said.
The two-year bond rose 2 Canadian cents to C$101.71 to
yield 2.758 percent. The 10-year bond added 5 Canadian cents to
C$105.55 to yield 3.572 percent.
The yield spread between the two-year and 10-year bond was
81.4 basis points, down from 83.5 basis points at the previous
The 30-year bond gained 25 Canadian cents to C$116.90 for a
yield of 4.005 percent. In the United States, the 30-year
treasury yielded 4.473 percent.
The three-month when-issued T-bill yielded 2.45 percent,
unchanged from the previous close.
(Reporting by Lynne Olver; Editing by Peter Galloway)
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