By Frank Pingue
TORONTO, Sept 10 (Reuters) - The Canadian dollar finished
higher versus the U.S. currency on Monday due to a rally in
commodity prices and expectations that the U.S. Federal Reserve
will cut interest rates next week.
Bonds, with no Canadian data to consider, followed U.S.
treasuries higher as last week's surprisingly weak U.S. jobs
report continued to hover over the market.
The Canadian dollar closed at C$1.0525 to the U.S. dollar,
or 95.01 U.S. cents, up from C$1.0545 to the U.S. dollar, or
94.83 U.S. cents, at Friday's session close.
In the overnight session, the Canadian dollar fell to about
C$1.0593 to the U.S. dollar, or 94.40 U.S. cents, but its
ability to stay above a key level convinced investors to take
it back higher.
The Canadian dollar rallied until hitting a session high of
C$1.0515, or 95.10 U.S. cents, during the last half-hour of the
North American session.
"I think the market was caught a little bit long in an
overbought market and I think we saw some position-squaring,"
said George Davis, chief technical strategist at RBC Capital
Markets. "And commodities in general are firm, which has sort
of helped the (Canadian) currency."
Oil prices surged to near a record high over $78 a barrel,
while gold prices jumped above the key $700 an ounce level to
move within sight of a 16-month high.
The Canadian economic calendar will pick up on Tuesday as
July trade data and August housing data are due for release,
but a speech expected from U.S. Federal Reserve Chairman Ben
Bernanke could grab the market's attention.
"The market is going to be looking at that for any type of
insight in terms of the Fed's view on economic conditions and
monetary policy, especially in light of the weak employment
numbers that we saw on Friday," Davis said.
Last week's U.S. jobs report missed expectations and marked
the first time in four years that monthly hiring contracted.
Canadian jobs data topped expectations.
Expectations that the Fed will cut its key fed funds rate
and forecasts that the Bank of Canada will leave its key rate
steady suggest a narrower interest rate spread that would favor
the Canadian dollar.
BONDS TILT HIGHER
Canadian bond prices managed to extend last week's rally
with slim gains, and the bigger U.S. treasuries market was
credited with the setting the tone.
The nagging global credit concerns that rattled financial
markets for much of August kept investors interested in the
safety of government bonds.
Dealers were also awaiting a speech by Bank of Canada
Governor David Dodge on Wednesday for possible comments that
may indicate that the downward risks of the credit crunch are
offsetting the upward risks of an expanding Canadian economy.
The two-year bond rose 1 Canadian cent to C$99.35 to yield
4.142 percent, while the 10-year bond rose 14 Canadian cents to
C$97.87 to yield 4.269 percent.
The yield spread between the two-year and 10-year bond
moved to 12.7 basis points from 13.7 at the previous close.
The 30-year bond rose 20 Canadian cents to C$111.26 to
yield 4.323 percent. In the United States, the 30-year treasury
yielded 4.639 percent.
The three-month when-issued T-bill yielded 4.03 percent, up
from 4.02 percent at the previo