CANADA FX DEBT-C$ touches 7-week high after takeover approvals

Mon Dec 10, 2012 5:00pm EST

* C$ closes at $0.9870 vs US$, or $1.0132
    * C$'s high for the day was C$0.9865 vs US$, or $1.0137
    * Bond prices climb across the curve

    By Solarina Ho
    TORONTO, Dec 10 (Reuters) - The Canadian dollar broke
through recent trading ranges to hit a seven-week high against
the greenback on Monday after the Canadian government gave the
green light to two controversial takeovers in the energy sector.
    Canada approved CNOOC Ltd of China's $15.1 billion
bid for Nexen Inc and the $5.3 billion takeover of
Progress Energy Resources Corp by Malaysia's Petronas
, but it also announced new rules that will curb
investments by state-owned enterprises. 
 
    "If we compare (the Canadian dollar) to the value last week,
the approval on Friday of the two big takeovers - that has been
helping the Canadian dollar gain some strength," said Charles
St-Arnaud, economist and currency strategist at Nomura
Securities in New York.
    "But in the medium to long term, the higher hurdle for
takeovers by state-owned enterprises may at the margins be
negative".
    Market sources noted that by drawing a line in the sand
against future acquisitions in the Alberta oil sands by foreign
state-owned enterprises, the Canadian government could be seen
by some as raising hurdles for takeovers in general. 
    "I think any flow associated with that transaction is CAD
positive but I think it is right to not go overboard on the
forward-looking implications beyond that because of that very
strong qualification that went with it," said Adam Cole, global
head of FX strategy at RBC Capital Markets in London.
    The Canadian dollar finished Monday's session at
C$0.9870 versus the U.S. dollar, or $1.0132, compared with
Friday's North American session close of C$0.9910, or $1.0091.
    Earlier on Monday, the currency hit C$0.9865, or $1.0137,
its strongest level since Oct. 19.
    Cole said the next significant level of resistance for the
Canadian dollar was around C$0.9820, or $1.0183.
    The Canadian dollar's performance was mixed against other
major currencies. At one point, it touched its strongest level
against the euro in almost a month and against sterling in
nearly seven weeks before weakening off.
    Canadian bond prices climbed across the curve, tracking U.S.
Treasuries on concerns over protracted budget negotiations in
Washington, political rumblings in Italy and expectations for
further monetary policy easing by the U.S. Federal Reserve.
 
    The two-year bond added 1.5 Canadian cents to
yield 1.059 percent, and the benchmark 10-year bond 
rose 7 Canadian cents to yield 1.702 percent.
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