By Frank Pingue
TORONTO, Aug 2 (Reuters) - The Canadian dollar closed at
its highest level in a week against the greenback on Thursday,
helped by a fresh wave of merger-related interest.
Domestic bond prices finished a touch higher, but the move
was limited ahead of a key U.S. payrolls report due on Friday.
The Canadian dollar closed at C$1.0534 to the U.S. dollar,
or 94.93 U.S. cents, up from C$1.0575 to the U.S. dollar, or
94.56 U.S. cents, at Wednesday's close.
Part of the currency's strength during an otherwise quiet
session was explained by ongoing foreign demand in Canadian
companies, which has been one of the key forces behind the
currency's strength for the past year.
On Wednesday, Houston-based Marathon Oil Corp. (MRO.N: Quote, Profile, Research) said
it would pay $5.56 billion for Canada's Western Oil Sands
(WTO.TO: Quote, Profile, Research), which directed the dollar in a quiet session.
"That kind of spiced up the currency markets a bit but
there is not much else going on," said Carlos Leitao, chief
economist at Laurentian Bank of Canada in Montreal.
"Plus, stock markets around the world have settled down a
little bit and the world is not going to end tomorrow, so if
that's the case there is no need to sell the Canadian dollar."
After some sharp losses in equity markets around the globe
during the past week, given concerns over the U.S. subprime
market, stocks finally appeared to have found their footing.
The Canadian dollar hit a session high of C$1.0511, or
95.14 U.S. cents, around midday, but the currency tailed off a
touch and is expected to stay in a tight range overnight ahead
of the the U.S. jobs report.
"It's going to be quiet as people are being prudent to see
what happens tomorrow with the non-farm payrolls report," said
BONDS FLAT TO HIGHER
Canadian bond prices finished flat to slightly higher with
no domestic data to sway the market convincingly ahead of the
U.S. jobs report.
"We're just kind of going sideways until there is some sort
of a clear signal from the (U.S.) labor market tomorrow," said
Canadian building permit data for June will also be
released on Friday, but the report is not expected to have much
impact given that it is following a record high May reading.
The two-year bond was flat at C$98.46 to yield 4.641
percent, while the 10-year bond gained 18 Canadian cents to
96.36 to yield 4.504 percent.
The yield spread between the two-year and 10-year bond was
at -13.7 basis points against -12.2 at the previous close.
The 30-year bond rose 51 Canadian cents to C$110.04 to
yield 4.392 percent. In the United States, the 30-year treasury
yielded 4.913 percent.
The three-month when-issued T-bill yielded 4.59 percent,
unchanged from the previous close.