Forex Market News - Canadian dollar follows oil prices to lower close
Thu Nov 1, 2007 5:18pm EDT
By Frank Pingue
TORONTO, Nov 1 (Reuters) - The Canadian dollar slipped from
its modern-day high en route to a lower close versus the U.S.
currency on Thursday as oil prices eased from a record high and
risk appetite diminished.
Canadian bond prices shot higher as investors fled equity
markets in favor of more secure government debt, but gains were
capped ahead of key jobs data due on Friday.
The Canadian dollar closed at US$1.0512, which makes a U.S.
dollar worth 95.13 Canadian cents, down from Wednesday's close
of US$1.0585, or 94.47 Canadian cents.
Two of the largest U.S. banks were downgraded and the news
reignited concerns about the health of the U.S. economy and
rattled equity markets and oil prices.
Concerns about the U.S. economy dragged the price of U.S.
oil to $93.49 a barrel after hitting a record high above $96 a
barrel earlier on Thursday.
"The commodity currencies have been at the forefront in the
movements in the forex markets today largely as a result in the
reduction of risk appetite," said David Powell, currency at
IDEAglobal in New York.
"But in terms of the fundamentals nothing has really
changed and this will likely be viewed as an opportunity to
(buy the Canadian dollar)."
Powell suggested the Canadian dollar could reach US$1.0695,
or 93.50 Canadian cents, if the jobs data on Friday from Canada
and the United States do not change the current fundamentals,
which are positive for the Canadian currency.
The fall in stock markets, which wiped out all the week's
gains for U.S. equities and almost all the gains for Canadian
shares, was spurred by news that CIBC World Markets downgraded
Citigroup and Bank of America, sparking worry about the U.S.
Canada relies heavily on exports to the United States, its
biggest trading partner, so any significant slowdown south of
the border could squeeze economic growth in Canada.
The fall in the Canadian dollar did not garner much concern
as it followed the currency's rise on Wednesday to its highest
level since the late 1800s, when it was at US$2.78.
Some market experts are calling the Wednesday move to
US$1.0617, or 94.19 Canadian cents, the record high for the
currency given the fundamental changes in market conditions
since the 1800s.
Canadian bond prices rallied in sympathy with the bigger
U.S. Treasury market as a wave of investors dumped equities in
favor of government debt following the bank downgrades and an
earnings miss by Exxon Mobil.
But with no Canadian data to influence a move, dealers
shied away from big commitments until the key Canadian and U.S.
jobs data are released on Friday.
The Canadian economy is expected to have added 11,000 jobs
in October, compared with September's bigger-than-expected gain
of 51,100, according to a Reuters survey.
The two-year bond gained 19 Canadian cents to C$100.36 to
yield 4.068 percent, while the 10-year bond added 41 Canadian
cents to C$98.00 to yield 4.256 percent.
The yield spread between the two-year and 10-year bond
moved to 18.8 basis points from 14.3 at the previous close.
The 30-year bond rose 76 Canadian cents to C$111.24 to
yield 4.322 percent. In the United States, the 30-year treasury
yielded 4.638 percent.
The three-month when-issued T-bill yielded 4.00, down from,
4.02 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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