Wednesday August 5, 2009 - 21:12:50 GMT
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Reuters - www.reuters.com
Forex Market News - CANADA FX DEBT-C$ reverses slide, ends above 93 U.S. cents
Wed Aug 5, 2009 4:43pm EDT
* C$ moves comfortably off overnight low
* Flaherty comments cap C$ rise
* Bond prices pinned lower across curve
By Frank Pingue
TORONTO, Aug 5 (Reuters) - Canada's dollar erased an early
slide and closed higher versus the greenback on Wednesday as
hopes for improvement in the global economy helped to ignite
greater appetite for riskier assets.
The turnaround in the currency, which began just before the
midway point of the North American session, capped a skid that
began immediately after Canadian Finance Minister Jim Flaherty
said on Tuesday that steps could be taken to slow the Canadian
dollar's ascent. [ID:nN04143584]
Undermining Flaherty's remarks was the increasingly deeply
rooted view that the worst of the world recession is over,
which is dampening the safe-haven appeal of the U.S. dollar as
traders opt to move back into riskier currencies and assets.
"There's just been a little bit of risk acceptance and
(U.S.) dollar negativity on that," said Tyson Wright, senior
foreign exchange trader Custom House, a currency services firm
in British Columbia.
"But at the same time we are really hitting a brick wall
just under C$1.07 ... and that's to do with Flaherty comments
being a little bit of an overhang on the market."
The Canadian unit closed at C$1.0701 to the U.S. dollar, or
93.45 U.S. cents, up from C$1.0745 to the U.S. dollar, or 93.07
U.S. cents, at Tuesday's close.
That was also well above a low reached early on Wednesday
of C$1.0785 to the U.S. dollar, or 92.72 U.S. cents, and not
far from a session high of C$1.0678 to the U.S. dollar, or
93.65 U.S. cents.
The latest U.S. data showed private-sector employers cut
more jobs than expected in July while the services sector
shrank. But the total number of jobs lost was fewer than in
June and gave the market hope that Friday's U.S. jobs data will
show improvement in the labor market. [ID:nN05240699]
"People are looking to the future and think that things
have bottomed at this point and that from here on in stocks are
generally going to move up and therefore it's time to move back
into currencies and riskier assets," Wright said.
Respondents in a Reuters poll released on Wednesday said
Canada's currency will back away from the 10-month high it
reached early on Tuesday due to talk of central bank
intervention and possible U.S. interest rate hikes.
BONDS PRICES DOWN
Canadian bond prices ended down across the curve, adding to
losses recorded in the previous session, as European data
helped further hopes that global recovery is gaining steam and
pulled investors away from safe-haven government debt.
Reports showed the deep recession in the euro zone services
economy eased in July, while Britain's services sector posted
an unexpected surge in the same month, fueling hopes the
economy might have started growing again. [ID:nLAG003649]
The next Canadian data that may influence bond prices are
building permits figures for June, due out on Thursday.
The marquee Canadian data for the week will arrive Friday,
when the July jobs report is released. The data is expected to
show the economy shed 17,500 jobs, while the unemployment rate
rose to 8.6 percent
The two-year Canadian bond ended down 6 Canadian cents at
C$99.04 to yield 1.473 percent, while the 10-year bond lost 48
Canadian cents to C$101.32 to yield 3.588 percent.
The 30-year bond fell 90 Canadian cents to C$115.50 to
yield 4.064 percent. In the United States, the 30-year Treasury
yielded 4.560 percent.
Canadian bonds outperformed U.S. Treasuries across the long
end of the curve. The Canadian 30-year bond was about 49.6
basis points below the U.S. 30-year yield, compared with about
44.9 basis points below on Tuesday.
(Editing by Peter Galloway)
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