Wednesday October 7, 2009 - 00:08:21 GMT
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Reuters - www.reuters.com
Forex Market News - CANADA FX DEBT-C$ hits one-year high, boosted by commodities
* Hits 94.82 U.S. cents, highest since Sept. 30, 2008
* Helped higher by Australian rate hike
* Commodity, equity market gains also lift currency
* Bond prices weaken, Canada underperforms U.S. market
(Updates to finish, adds quotes)
By Jennifer Kwan
TORONTO, Oct 6 (Reuters) - Canada's dollar rose to its
highest level in a year versus the U.S. currency on Tuesday on
soaring commodity and equity prices as investors grew more
optimistic about global economic recovery.
The Canadian currency touched a high of C$1.0546 to the
U.S. dollar, or 94.82 U.S. cents, its highest level since Sept.
30, 2008, on a string of factors set off by the Reserve Bank of
Australia's decision to hike rates to 3.25 percent from 3
The hike made it the first of the Group of 20 central banks
to raise interest rates as the global financial crisis eases.
[ID:nSYD520296]. Financial markets took it as a signal world
economies may be on the path to recovery.
"If Australia is now viewing their market and the Asian
market as growth returning to trend, that's positive for
commodities. That, by default, would be positive for Canada,"
said Camilla Sutton, currency strategist at Scotia Capital.
The rate hike set off speculation on which central bank may
raise rates next. However, Scotia Capital economists said in
their view the possibility of Canada following sooner than
expected is "precisely nil."
The Bank of Canada earlier this year chopped its benchmark
interest rate to a record low of 0.25 percent and pledged to
keep it there until at least the middle of 2010, assuming
inflation remains tame.
The currency finished at C$1.0596 to the U.S. dollar, or
94.38 U.S. cents, up from C$1.0701 to the U.S. dollar, or 93.45
U.S. cents, at Monday's close.
The Canadian dollar's move higher was also supported by
soaring commodity prices, with oil, a major Canadian export,
rising above $71 a barrel [O/R], while gold XAU= hit a record
high above $1,040 an ounce. [GOL/]. The currency's moves are
often influenced by prices for the two commodities.
As well, higher stock markets, typically a gauge of
investors' willingness to take on risk, also supported the
currency, with North American stock markets firmly in the
black. [.TO] [.N]
On the economic front, domestic data showed that business
purchasing activity in the economy rose in September and that
the value of building permits increased in August.
The next key technical level the market will be watching
for is C$1.0300 to the U.S. dollar, a mark not seen since last
September, said Sutton. The currency hit a low of C$1.0298 in
September of last year.
Canadian bonds were weaker across the curve as money flowed
to equities and prices followed U.S. Treasuries lower as the
market there braced for big supply this week, said Sheldon
Dong, fixed income analyst at TD Waterhouse Private
But the major headline hurting bond markets around the
globe was the Australian rate hike, he added.
"It's the first major country to hike rates. It's sort of
basically broken out of that solidarity," said Dong.
The two-year CA2YT=RR bond was down 15 Canadian cents at
C$99.53 to yield 1.254 percent, while the 10-year bond
CA10YT=RR sank 52 Canadian cents to C$103.60 to yield 3.848
Canadian bonds mostly underperformed U.S. Treasuries, with
the yield at the 10-year maturity rising to almost 4 basis
points above the U.S. yield curve from 2 basis points on
(Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)
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