Thursday June 28, 2007 - 22:58:39 GMT
Share This Story
Reuters - www.reuters.com
Forex Market News - Canadian dollar higher with oil, bonds mixed
Canadian dollar higher with oil, bonds mixed
Thu Jun 28, 2007 5:43 PM ET
By John McCrank
TORONTO, June 28 (Reuters) - The Canadian dollar got a lift from stronger oil prices to end higher against the greenback on Thursday, while bonds finished mixed ahead of key domestic economic data on Friday.
The currency ended the day at C$1.0594 to the U.S. dollar, or 94.33 U.S. cents, up sharply from C$1.0702, or 93.44 U.S. cents, at Wednesday's session close.
"The big fundamental drivers of the Canadian dollar over the long term are short-term interest rate spreads, non-energy commodity prices and energy prices, so if there's an energy price burst going on here, that probably explains a good part of the upward trek of the currency today," said Marc Levesque, chief fixed income strategist at TD Securities.
The currency rose as U.S. oil pushed past $70 a barrel for the first time in over 10 months, before settling at $69.57 for a gain of 60 cents. Gold prices also edged higher. The Canadian dollar often rises in line with the two commodities as the country is a major producer of both.
South of the border, the U.S. Federal Reserve kept interest rates steady, as expected, while reiterating that inflation was still a key concern.
Meanwhile, the Bank of Canada is widely expected to raise its key overnight rate on July 10 by 25 basis points to 4.50 percent, and may raise rates again in September.
Higher rates tend to lure investors to a country's currency as they offer better short-term investment.
"The interest rate spread story is, I think, going to be supportive of the Canadian dollar going forward," said Levesque.
"We could well see a little more of that tomorrow with the Bank of Canada and its outlook survey, which will probably nail down more good reasons for the Bank of Canada to be raising rates in July."
On Friday, April's gross domestic product figures and the Bank of Canada's Business Outlook Survey are set to be released.
Statistics Canada said on Thursday that factory prices fell 0.5 percent in May from April, while the price paid by manufacturers for raw materials slipped 0.2 percent in May due to lower prices for crude oil and ferrous metals.
BOND PRICES MIXED
Bond prices had followed U.S. treasuries lower after the Fed rate announcement, but made up most of the losses ahead of Friday's domestic data.
"I think it might be holding relatively steady ahead of tomorrow's numbers, because there could still be an impact from the Business Outlook Survey and also the GDP number," said Max Clarke, an economist at IDEAglobal in New York.
The market will also be looking ahead to next Friday's domestic employment figures.
The two-year bond was up 2 Canadian cents at C$98.38 to yield 4.644 percent, while the 10-year bond fell 4 Canadian cents to C$95.45, yielding 4.629 percent.
The yield spread between the two-year and 10-year bond was -1.5 basis points.
The 30-year bond rose 10 Canadian cents to C$118.00 to yield 4.559 percent. In the United States, the 30-year treasury yielded 5.206 percent.
The three-month when-issued T-bill yielded 4.43 percent, down from 4.46 percent at the previous close.
Â© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."