Thursday July 12, 2007 - 21:25:41 GMT
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Reuters - www.reuters.com
Forex News - M&A deal, data boost Canadian dollar, bonds down
M&A deal, data boost Canadian dollar, bonds down
Thu Jul 12, 2007 4:09PM EDT
(Corrects currency conversion in fifth paragraph)
TORONTO, July 12 (Reuters) - The Canadian dollar rose
against the greenback on Thursday, lifted by a $38.1 billion
takeover offer for Canada's Alcan Inc. from Anglo-Australian
miner Rio Tinto Ltd/Plc. as well as strong domestic economic
Domestic bond prices, which had earlier shrugged off the
better-than-expected May merchandise trade and new house price
data, gave up their gains as Toronto equities soared on the
Alcan (AL.TO: Quote, Profile, Research) news.
Markets are now focused on the Bank of Canada's monetary
policy update at 10:30 a.m. (1430 GMT) later on Thursday and a
press conference by Governor David Dodge at 11:15 a.m.
The central bank hiked interest rates by 25 basis points on
Tuesday, putting the overnight rate at 4.50 percent.
At 10:05 a.m., the Canadian dollar was at C$1.0474 to the
U.S. dollar, or 95.47 U.S. cents, up from C$1.0538, or 94.89
U.S. cents, at Wednesday's session close.
"I think the Alcan announcement puts a solid bid under
Canada, and I think after retracing all of the post-Bank of
Canada pricing action, (the currency) is poised to take another
run at the multi-decade high of C$1.0444," said Jack Spitz,
director of foreign exchange at National Bank Financial.
Rio Tinto's (RIO.L: Quote, Profile, Research) (RIO.N: Quote, Profile, Research) $38.1 billion cash offer for
Alcan would create the world's biggest aluminum producer and
tops a rival cash-and-shares bid from U.S. firm Alcoa Inc.
Foreign-led takeovers of Canadian companies have been a
boost to the Canadian currency for much of the past year, as
the foreign company has to convert the cash part of the deal to
Canadian dollars when the transaction is consummated.
The commodity-led currency will also get a boost from
energy prices, which continue to be robust as London Brent
crude climbed back above $76 a barrel, and U.S. crude rose to
BOND PRICES RETREAT
Canadian bond prices gave up modest early gains as equity
markets in Toronto and New York rose more than 100 points on
Thursday, drawing funds away from government debt.
Bonds had risen earlier in the session despite economic
data from Statscan. Canada's trade surplus was virtually
unchanged at C$5.9 billion in May but was above analysts'
average forecast of C$5.5 billion.
In contrast, the U.S. deficit widened to US$60 billion in
May, from a revised US$58.7 in April.
Meanwhile, Statscan reported a stronger-than-expected 1.1
percent rise in May housing prices.
Canada's two-year bond down 2 Canadian cents at C$98.38 to
yield 4.660 percent, while the 10-year bond was down 9 Canadian
cents at C$95.46 to yield 4.629 percent.
The yield spread between the two-year and 10-year bond was
at -3.1 basis points, from -2.5 basis points at the previous
The 30-year bond was off 30 Canadian cents at C$117.80 to
yield 4.575 percent. In the United States, the 30-year treasury
yielded 5.205 percent.
The three-month when-issued T-bill yielded 4.53 percent,
unchanged from the previous close.
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