By Frank Pingue
TORONTO, Sept 13 (Reuters) - The Canadian dollar shot to a
30-year high versus the U.S. currency on Thursday as commodity
prices remained at lofty levels, while the greenback could not
shake off expectations for a U.S. interest rate cut next week.
Bond prices ended lower as easing credit concerns allowed
North American equity markets to rally and dampened the
appetite for safe haven government debt.
The Canadian dollar closed at C$1.0327 to the U.S. dollar,
or 96.83 U.S. cents, up from C$1.0361 to the U.S. dollar, or
96.52 U.S. cents, at Wednesday's session close.
Earlier in the session the Canadian dollar hit C$1.0311 to
the U.S. dollar, or 96.98 U.S. cents, which marked its highest
level in 30 years and eclipsed the previous multi-decade high
it reached in late July.
Much of the Canadian dollar's recent string of gains has
been attributed to U.S. dollar weakness since last week's U.S.
jobs report unexpectedly fell well short of estimates.
Commodity prices have also played a key role, especially
the rise in oil prices to record levels above $80 a barrel and
gold prices sitting comfortably above $700 an ounce.
"The catalyst here really is kind of the broad environment
of (U.S.) dollar weakness that has been in place since last
Friday's August nonfarm jobs report," said David Powell,
currency analyst at IDEAglobal in New York.
"And also we're seeing some independent Canadian dollar
strength as oil prices remain elevated."
The weak data south of the border have the market fully
expecting the U.S. Federal Reserve to cut its key interest rate
next week from the current 5.25 percent level.
Such a move would narrow the Canada-U.S. rate gap in favor
of the Canadian currency as the Bank of Canada is expected to
leave its key rate steady at 4.50 percent when it next sets
policy on Oct. 16.
The Canadian dollar's latest rise reignited chatter of the
currency reaching parity with the greenback, a level it has not
been at since November 1976.
Powell does expect the Canadian dollar to hit parity soon
and while he did not rule out such a move before year-end he
did say it is unlikely if the Bank of Canada keeps rates
BONDS TILT LOWER
Canadian bond prices slipped further and handed back more
of the gains recorded after last week's U.S. jobs report as
investors moved out of secure assets such as bonds and back
Data released on Thursday showed Canadian industries ran at
83.0 percent of capacity in the second quarter of 2007, which
marked the second straight gain after four quarterly declines
but missed estimates.
The data, which will be followed by figures from a July
survey of manufacturing on Friday, are not considered top-tier
and did not have any noticeable impact on the market.
The two-year bond fell 8 Canadian cents, to C$99.15 to
yield 4.268 percent, while the 10-year bond dropped 25 Canadian
cents to C$97.15 to yield 4.357 percent.
The yield spread between the two-year and 10-year bond was
at 8.9 basis points from 10.9 at the previous close.
The 30-year bond fell 27 Canadian cents to C$110.19 to
yield 4.383 percent. In the United States, the 30-year treasury
yielded 4.733 percent.
The three-month when-issued T-bill yielded 4.03 percent, up
from 4.02 percent at the previous close.