* C$ ends session at C$0.9458 to US$, or $1.0573
* Near 3-1/2 year high as U.S. debt woes persist
* Canada currency taking on safe-haven character
* Bond prices softer, but outperform Treasuries
(Updates to close, adds analyst comments, details)
By Andrea Hopkins
TORONTO, July 25 The Canadian dollar finished
stronger against its U.S. counterpart on Monday, within sight
of last week's 3-1/2 year high, as a stalemate in U.S. debt
talks boosted Canada's flight-to-safety status.
The breakdown in U.S. budget talks has fueled demand for
perceived safe-haven currencies, as the greenback hit a record
low versus the Swiss franc and a four-month trough against the
"In the absence of any debt deal in the U.S., markets are
still very nervous and with that nervousness Canada is
continuing to be one of the favorites," said Steve Butler,
director of foreign exchange trading at Scotia Capital.
"We do get a bit of short-covering toward the end of the
day as people get a little bit leery going home too long Canada
at 3-1/2 year highs, but I think we'll be trading down towards
the mid 93s later in the week all things being equal."
The currency CAD=D4 finished the session at C$0.9458 to
the U.S. dollar, or $1.0573, up from Friday's North American
session close of C$0.9491 to the U.S. dollar, or $1.0536.
The currency hit a session high of C$0.9434, near the 3-1/2
year high of C$0.9424 it reached on Thursday. The Canadian
dollar rallied last week on market perceptions of a more
hawkish tone from the Bank of Canada.
Most investors expect a U.S. deal will be done before the
Aug. 2 deadline to avert default. But the lack of progress over
how to cut the budget deficit and raise the debt ceiling
heightened the possibility of a ratings downgrade of U.S. debt
and weighed on risk sentiment, which analysts said would keep
dogging the greenback. [nN1E76M0B0][ID:nN1E76N0CA]
David Rosenberg, chief economist and strategist at Gluskin
Sheff, said Canada is emerging as a safe haven almost in a
league with gold or the Swiss franc, valued for its political
stability and solid central bank in addition to its resource
"The Canadian dollar's character may be undergoing a
profound transformation. Not just a commodities currency, as
much as that in and of itself is an alluring feature, but also
a reflection of relative political, fiscal, financial and
economic stability in a world that is wracked with uncertainty
and instability," Rosenberg said.
Canadian government bond prices drifted lower, tracking the
move in U.S. Treasuries. [US/]
They outperformed their U.S. counterparts across the curve,
however, on investor concern that the world's biggest economy
could lose its prized top-notch credit rating.
The two-year bond CA2YT=RR was down 1 Canadian cent to
yield 1.507 percent, while the 10-year bond CA10YT=RR lost 1
Canadian cent to yield 2.933 percent.
The Canadian 10-year yield was 7.7 basis points below its
U.S. counterpart, compared with 4.5 basis points below on
(Editing by Jeffrey Hodgson)