Monday March 23, 2009 - 21:15:48 GMT
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Reuters - www.reuters.com
Forex Market News - CANADA FX DEBT-C$ hits 6-week high on rise in risk appetite, oil
* C$ closes at six week high
* Risk appetite grows with US plan for toxic assets
* No direct currency impact from Suncor-Petrocan deal
* Bonds fall, focus on supply, stocks
(Updates to close)
By Ka Yan Ng
TORONTO, March 23 (Reuters) - The Canadian dollar jumped to
a six-week high against the U.S. dollar on Monday as risk
appetite sharpened on news of a U.S. plan to help rid banks of
toxic assets and the price of oil climbed.
The U.S. Treasury Department rolled out detailed plans to
persuade private investors to help it take up as much as $1
trillion in bad assets now choking bank balance sheets.
The news lifted optimism on global equity markets. Further
support for the Canadian dollar came from oil prices, which
rose more than 3 percent to near $54 a barrel on Monday. Canada
is a big oil producer and explorer and the domestic currency's
direction is often guided by the price of the commodity.
The currency finished at C$1.2225 to the U.S. dollar, or
81.80 U.S. cents, up from C$1.2395 to the U.S. dollar, or 80.68
U.S. cents, at Friday's close.
"Whenever you're looking at the Canadian dollar nowadays,
you bring up two charts. One is equities, one is oil," said
David Watt, senior currency strategist at RBC Capital Markets.
But he noted the Canadian dollar has recently
underperformed other commodity-linked currencies, held back by
the Bank of Canada's decision to cut interest rates and
consider ways to pump money into the financial system.
The Australian and New Zealand dollars, forged ahead more
than 2 percent against the U.S. dollar on Monday, while the
Canadian dollar lagged those gains.
But the economic outlook has picked up somewhat recently,
and the building blocks for increased optimism have been
steadily forming for the Canadian dollar, analysts said.
"I think what we're seeing now in (the Canadian dollar) is,
to an extent, catching up. It needed a lot of help in order to
keep going. Whether or not it continues is hard to say. We're
certainly in a better place now than we were," said Watt.
The currency was little swayed by Canada's lone data point
for the week, which showed a steeper-than-expected 1.1 drop in
the composite leading indicator in February. [ID:nN23482377]
An all-stock C$18.43 billion merger of Canadian oil
companies Suncor Energy (SU.TO: Quote, Profile, Research, Stock Buzz) and Petro-Canada (PCA.TO: Quote, Profile, Research, Stock Buzz) lent
support to Toronto stocks, but had no direct impact on the
Canadian currency. [ID:nN22497404]
The Canadian dollar made headway outside of its recent
trading range between C$1.23 and C$1.24, rising as high as
C$1.2203 to the U.S. dollar, or 81.95 U.S. cents.
The breakout for dollar/Canada ultimately should be at the
next support level at C$1.2190, said Jack Spitz, managing
director of foreign exchange at National Bank Financial.
Canadian bond prices were lower across the curve on Monday
as another week of huge supply south of the border was waiting
to be absorbed and as equities rallied strongly.
An unexpected rise in U.S. existing home sales in February
also weighed on bonds.
Market players were more focused on the U.S. Treasury,
which will sell about $158 billion in new debt this week, than
on the longer-term toxic asset plan.
The two-year bond fell 5 Canadian cents to C$102.87 to
yield 1.126 percent. The 10-year bond fell 25 Canadian cents to
C$108.60 to yield 2.774 percent.
The 30-year bond fell 20 Canadian cents to C$124.35 to
yield 3.615 percent. The U.S. 30-year bond yielded 3.690
Canada bonds outperformed across the curve. The 30-year
bond yield was 7.5 basis points below its U.S. counterpart,
compared with 4.9 basis points below on Friday.
(Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)
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