Forex Market News - Canadian dollar follows oil prices to higher close
Thu Oct 25, 2007 4:26pm EDT
By Frank Pingue
TORONTO, Oct 25 (Reuters) - The Canadian currency closed
higher versus the U.S. dollar on Thursday but finished off the
33-year high it hit early in the session, supported mostly by a
sharp jump in oil prices to record highs.
Canadian bond prices ended lower as data showed sales of
new U.S. single-family homes rose in September, but the drop
was limited ahead of the U.S. Federal Reserve's rate decision
The Canadian dollar closed at US$1.0353, making the U.S.
dollar worth 96.59 Canadian cents, up from Wednesday's session
close of US$1.0318, or 96.91 Canadian cents.
Early in the session the Canadian dollar touched US$1.0403,
its highest level since May 1974, shortly after durable goods
data out of the United States missed expectations and weighed
on the greenback.
Lofty oil prices helped the Canadian dollar's rise as
Canada is a major producer and exporter of oil and its currency
often moves in tandem with oil prices.
But the combination of a weak U.S. dollar and lofty oil
prices was only able to drive the Canadian dollar for so long
as it spent the latter half of the session bouncing back and
forth in a range comfortably below its session high.
"The U.S. dollar is generally on the defensive and you
would have thought that would've given the Canadian dollar more
support," said Doug Porter, deputy chief economist at BMO
"It just goes back to the fact that so much good news is
built into the Canadian dollar already it might take a lot more
to push higher yet again."
Oil prices eventually hit a record high above $90 a barrel,
but it was not enough to help the Canadian dollar take another
stab at scaling the more than three-decade high it reached
earlier in the North American session.
The Canadian dollar broke through parity with the greenback
in September for the first time since 1976.
Canadian bond prices ended lower despite fundamentally weak
housing data that did little to change the market's
expectations for an interest-rate cut by the Fed next week.
Even though sales of new U.S. single-family homes rose in
September, the annual rate was lower than expected, while
downward revisions also meant the previous month's total was
less than originally estimated.
"I thought that most of the economic data were generally
friendly today for Treasuries," said Porter. "But just the fact
that there was a plus sign in front of new home sales data took
a little steam out of the Treasury market."
The market has fully priced in a 25 basis point cut to the
U.S. Federal Reserve's federal funds rate to 4.50 percent next
week, which would put U.S. interest rates on par with Canadian
rates for the first time since February 2005.
The next Canadian economic report due out will be the
October Business Conditions Survey, due on Friday.
The two-year bond fell Canadian cents to C$100.20 to yield
4.149 percent, while the 10-year bond dropped 11 Canadian cents
to C$97.66 to yield 4.299 percent.
The yield spread between the two-year and 10-year bond
moved to 15.5 basis points from 16.0 at the previous close.
The 30-year bond slipped 14 Canadian cents to C$110.50 to
yield 4.364 percent. In the United States, the 30-year Treasury
yielded 4.671 percent.
The three-month when-issued T-bill yielded 3.95 percent, up
from 3.93 percent at the previous close.
Reuters journalists are subject to the Reuters Editorial Handbook which requires fair presentation and disclosure of relevant interests.
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