By Frank Pingue
TORONTO, Aug 30 (Reuters) - The Canadian dollar rose versus
the U.S. currency on Thursday due in part to takeover talk
surrounding BlackBerry maker Research In Motion (RIM.TO: Quote, Profile, Research), but
the speculation did not hold the market's attention and the
currency fell from its session high.
Domestic bond prices finished higher amid another drop in
equity markets, which convinced investors to seek out the
safety offered by government debt.
The Canadian dollar closed at C$1.0586 to the U.S. dollar,
or 94.46 U.S. cents, up from C$1.0605 to the U.S. dollar, or
94.30 U.S. cents, at Wednesday's close.
Market speculation that Microsoft Corp (MSFT.O: Quote, Profile, Research) might be
considering a bid for RIM helped the Canadian dollar rally
nearly 1 U.S. cent to a session high of 94.84 U.S. cents, in
less than a two-hour span ahead of midday.
But both companies declined to comment on the rumors, which
seemed to lose steam as the session went on and took out some
of the currency's gains as the session continued.
"It seems that the rumor of the big M&A inflows might have
just pushed the market towards the C$1.0550 level ... before it
hit resistance," said Matthew Strauss, senior currency
strategist at RBC Capital Markets.
The market did not appear to move significantly following
remarks by Finance Minister Jim Flaherty, who said that
problems in Canada's asset-backed commercial paper market could
take months to resolve.
Instead, the Canadian dollar exited the session under a bit
of pressure ahead of key second-quarter gross domestic product
data due on Friday, which is expected to show annualized growth
of 2.8 percent, according to a Reuters survey.
Risk for the Canadian dollar is now skewed to the downside
as the data, which marks the last numbers the Bank of Canada
will consider ahead of its Sept. 5 rate announcement, follows
credit concerns that spooked markets in recent weeks.
"If it comes in slightly above market expectations it will
probably be disregarded as just a number before the crisis
started," said Strauss.
"However, there is a bit of a risk if it comes in below
expectations, then the market might pay attention to the number
because that basically would show the economy was softer going
into the financial crisis than anticipated."
BONDS GET BOOST
Canadian bond prices finished higher as their safe-haven
status kicked in amid falling North American equity markets.
Data that showed Canada's current account surplus grew to
C$8.36 billion in the second-quarter from C$6.11 billion in the
first quarter did not have much impact on prices.
Other data included industrial product prices, which rose a
bigger than expected 0.7 percent in July from June,
The two-year bond rose 1 Canadian cents to C$99.21 to yield
4.222 percent, while the 10-year bond ended up 15 Canadian
cents at C$97.10 to yield 4.368 percent.
The yield spread between the two-year and 10-year bond
moved to 14.6 basis points from 15.0 at the previous close.
The 30-year bond increased 27 Canadian cents to C$109.81 to
yield 4.404 percent. In the United States, the 30-year treasury
yielded 4.834 percent.
The three-month when-issued T-bill yielded 3.95 percent
unchanged from the previous close.