Forex News

CANADA FX DEBT-C$ rallies to two-week high against greenback

20 March, 2012 - Reuters
Adds analyst comment. Updates to close)
  • C$ ends at C$0.9875 vs US$, or $1.0127
  • Helped by rising commodity prices
  • Talk of Viterra deal also supports
  • Bond yields climb to 2012 highs
  • By Claire Sibonney

    TORONTO, March 19 (Reuters) - The Canadian dollar jumped to more than a two-week high against the U.S. currency on Monday, helped by a rally in commodity prices and the prospect of more takeovers of Canadian companies by foreign buyers.

    U.S. crude oil futures rose on persistent worries about supply disruption from Iran, firmer U.S. stocks and a weaker greenback.

    On Wall Street, shares got a boost from Apple Inc after the tech giant said it will pay a dividend and buy back stock, while the euro climbed amid the sense of some stabilization of Europe's debt troubles.

    "It looks like this was a general (U.S.) dollar move, the euro sort of led the way," said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets.

    Perrier said talk of a sale of Canada's biggest grain handler, Viterra Inc , was also positive for the currency.

    "Between potential M&A flows and general U.S. dollar weakness here, that's given us the first little bit of a move we've seen in over a week," he added.

    Canada's currency ended the North American session at C$0.9875 versus the U.S. dollar, or $1.0127, up from Friday's North American session close at C$0.9919 versus the U.S. dollar, or $1.0082.

    Earlier, the Canadian dollar hit an intraday high of C$0.9861 versus the U.S. dollar, or $1.0141, its strongest level since March 2.

    Recently, the U.S. dollar has been boosted by a steady stream of encouraging U.S. economic data, reducing the likelihood of further stimulus from the Federal Reserve.

    An influential Fed official said on Monday the central bank has not yet decided whether to embark on a third round of quantitative easing though it remains an option.

    "In the absence of any real significant fundamental news here, we're probably going to be fairly range bound and drifting a little bit," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets.

    Mikolich said he saw the Canadian dollar holding within a tight range between C$0.9990 and C$0.9840.

    As currency traders looked ahead to this week's Canadian retail sales and inflation numbers, data on Monday showed Canada's wholesale trade slumped a worse-than-expected 1 percent in January from December, the second decline in three months following six consecutive gains.

    But the data was more than offset by the broader "risk-on" bid in markets, which also knocked Canadian bond prices lower and send yields to fresh 2012 highs.

    Canada's two-year bond was down 1.5 Canadian cents to yield 1.291 percent, while the 10-year bond dropped 38 Canadian cents to yield 2.286 percent.

    Additional reporting by Jon Cook; Editing by Jeffrey Hodgson)

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