Canadian dollar in rare close north of greenback
By Frank Pingue
TORONTO, Sept 28 (Reuters) - The Canadian dollar benefited
from a struggling greenback on Friday to close north of the
U.S. currency for the first time in nearly 31 years.
Domestic bonds ended higher as economic data showed
Canada's economy grew less than had been expected in July.
Weaker North American equity markets added support.
The Canadian dollar closed at 99.48 Canadian cents to the
U.S. dollar, or US$1.005, up from C$1.0014 to the U.S. dollar,
or 99.86 U.S. cents, at Thursday's close.
The Canadian currency spent the entire North American
session above par with the greenback despite some weakness
early in the session after data that showed the economy grew
0.2 percent in July missed estimates.
"Given the broad-based U.S. dollar weakness we've tested
new recent lows for dollar Canada," said said Matthew Strauss,
senior currency strategist at RBC Capital Markets.
The U.S. currency has been stuck in a downward trend and
its latest slide followed tame U.S. inflation data that upped
the case for interest rate cuts by the U.S. Federal Reserve.
The weakness opened the door to more gains for the Canadian
dollar, which hit 99.13 Canadian cents to the U.S. dollar, or
US$1.008, during the North American session. That marked the
currency's highest level since November 1976.
Last week the Fed cut its key rate by 50 basis points to
4.75 percent, compared to the Bank of Canada's overnight rate
which was left steady at 4.5 percent three weeks ago.
Oil prices weighed slightly on the Canadian dollar as they
fell below $82 a barrel after a sharp jump the previous day.
But gold prices jumped to a 28-year high to help lessen the
impact from lower oil prices.
Commodity prices often influence the direction of the
Canadian dollar as the country is considered a major producer
and exporter of oil and gold.
Canadian bond prices, which had followed the bigger U.S.
treasuries market all week given the lack of any domestic data,
finished higher after the Canadian GDP report missed
Also adding to the rise in bond prices was data that showed
Canadian producer prices fell by a sharper-than-expected 1
percent in August from July, while raw materials prices turned
downward for the first time in January, declining 2.8 percent.
The Bank of Canada left C$1.039 billion in the Large Value
Transfer System on Friday for the weekend, substantially more
than the C$300 million it had targeted. It also plans to leave
C$300 million in the system on Monday.
When the market is quiet, the normal overnight settlement
balance is C$25 million.
The two-year bond rose 16 Canadian cents to C$100.35 to
yield 4.080 percent, while the 10-year bond jumped 45 Canadian
cents to C$97.35 to yield 4.338 percent.
The yield spread between the two-year and 10-year bond
moved to 25.8 basis points from 23.4 at the previous close.
The 30-year bond gained 66 Canadian cents to C$109.39 to
yield 4.428 percent. In the United States, the 30-year treasury
yielded 4.833 percent.
The three-month when-issued T-bill yielded 4 percent, down
from 4.02 percent at the previous close