CANADA FX DEBT-Greece, oil, data drive C$ to near 7-week high

Thu Jun 30, 2011 1:13pm EDT

   * C$ firms to C$0.9638 to the U.S. dollar, or $1.0376
 * Touches strongest point since May 13
 * Relief over Greek debt improves risk appetite
 * Better-than-expected Canadian data supports
 * Bond prices mostly lower
 By Trish Nixon
 TORONTO, June 30 (Reuters) - Canada's dollar strengthened
to a near seven-week high against the greenback on Thursday,
boosted by commodity price gains, an easing of Greece's debt
woes and slightly better-than-expected domestic economic data.
 World stocks and the euro rose to their highest in three
weeks as Greece approved the final austerity measures to secure
international funding and avoid bankruptcy. The news also
boosted commodity prices. [MKTS/GLOB]
 "It's the more positive approach to risk that is supporting
the Canadian dollar," said Shaun Osborne, chief currency
strategist at TD Securities.
 He pointed to the euro's rally and selloff in the U.S.
dollar, which had been the destination for some safe-haven
flows leading into the Greek votes.
 Osborne said domestic economic data also helped support the
Canadian dollar.
 Gross domestic product (GDP) was unchanged in April
following 0.3 percent growth in March, Statistics Canada said
on Thursday. This was slightly better than the average forecast
of a 0.1 percent decline. [ID:nN1E75T0ER]
 On Wednesday, data showed that inflation in Canada reached
its highest since May 2003, raising the prospect the central
bank could lift interest rates sooner than had been expected.
[ID:nN1E75S02V]
 "We had much stronger-than-expected inflation data and now
stronger-than-expected GDP data, so both will factor into
expectations for the Bank of Canada, pulling forward the
expectations of the market," said Camilla Sutton, chief
currency strategist at Scotia Capital.
 Overnight index swaps, which trade based on expectations
for the key central bank rate, showed that traders on Thursday
priced in a slightly higher probability of rate hikes later
this year following the GDP data, though a full 25-basis-point
rate hike was not priced in until 2012. BOCWATCH
 Higher interest rates tend to help a country's currency
appreciate because they often attract international capital
flows.
 Rising oil and copper prices also helped lift the
commodity-sensitive Canadian dollar, as oil climbed toward $113
a barrel and copper hit its highest in two months. [O/R]
[MET/L]
 At 12:20 a.m. (1620 GMT), the currency CAD=D4 stood at
C$0.9638 to the U.S. dollar, or $1.0376, up from Wednesday's
finish at C$0.9706 to the U.S. dollar, or $1.0303.
 Earlier it hit a session high of C$0.9632, or $1.0382, its
strongest since May 13.
 Osborne said he expects to see continued strength from the
Canadian dollar in the short-term.
 "It may not extend that much more today, but I would expect
pretty good (U.S. dollar) resistance now back toward C$0.97 or
C$0.975, and potentially a move back down toward C$0.95 over
the next week or two," he said.
 Canadian bond prices were lower across the curve as
investors sought riskier assets.
 The two-year bond CA2YT=RR was down 6 Canadian cents to
yield 1.59 percent, while the 10-year bond CA10YT=RR fell 20
Canadian cents to yield 3.11 percent.
 (With additional reporting by Solarina Ho; Editing by Jeffrey
Hodgson)




























FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.