Canadian dlr up ahead of key U.S. data, bonds down
The Canadian dollar was slightly
higher versus the U.S. currency on Thursday but further moves
were expected to be limited given the lack of any significant
domestic data and ahead of a key U.S. jobs report due on
Friday.
Domestic bond prices were slightly lower, handing back a
portion of recent gains fueled by the diverging monetary policy
risks between Canada and the United States.
At 9:15 a.m. (1315 GMT), the Canadian unit was at C$1.1073
to the U.S. dollar or 90.31 U.S. cents, up from C$1.1087 to the
U.S. dollar, or 90.20 U.S. cents, at Wednesday’s close.
With no key Canadian data to consider, currency traders
were expected to stick close to the sidelines until details of
the U.S. jobs report surface.
Any weakness in the U.S. labor market could further boost
the case for interest rate cuts by the U.S. Federal Reserve
while the Bank of Canada is widely expected to keep interest
rates unchanged for the foreseeable future.
”I think the market is fairly stable ahead of tomorrow’s
key U.S. payrolls report and I don’t think we are going to see
a big move ahead of that critical number,” said Doug Porter,
deputy chief economist at BMO Capital Markets.
”If it’s a very weak report then I think there will be some
questions raised over whether Canada’s economy will also
succumb to some U.S. weakness.”
But Porter said if the report is “a bit below” forecasts
then it could be ideal for the Canadian dollar because it could
open the door for Fed easing while the U.S. economy would not
undercut commodity prices.
Wednesday’s testimony before a Senate banking committee by
Bank of Canada Governor David Dodge and Senior Deputy Governor
Paul Jenkins after the market closed did not spark any sharp
moves for the Canadian currency.
Dodge said the central bank would not consider currency
intervention even if the Canadian dollar rises as high as 92.5
U.S. cents. He also said it was too soon to determine whether
the 4-percent rise in the currency against the U.S. dollar over
the past four weeks would require a change in interest rates.
Stronger economic data in Canada, higher commodity prices,
and takeover interest in Canadian companies have fueled the
currency over the past six weeks.
Merger-related interest in the Canadian currency could
continue as Swedish specialty steel maker SSAB (SSABb.ST: Quote, Profile, Research said
it had made a recommended cash offer for Ipsco (IPS.TO: Quote, Profile, Research that
values the firm at $7.7 billion.
BONDS SLIDE
Bond prices were lower as the absence of any key Canadian
data forced it to follow the drop in the bigger U.S. treasuries
market.
Data that showed Canadian foreign reserve holdings rose by
$874 million in April to $40.18 billion, did little to spur a
move in the bond market.
The two-year bond eased 2 Canadian cents to C$99.13 to
yield 4.192 percent, while the 10-year bond retreated 9
Canadian cents to C$98.46 to yield 4.206 percent.
The yield spread between the two-year and 10-year bond
moved to 0.3 basis points from 0.8 at the previous close.
The 30-year bond fell 35 Canadian cents to C$123.60 to
yield 4.245 percent. In the United States, the 30-year treasury
yielded 4.822 percent.
The three-month when-issued T-bill yielded 4.17 percent,
down from 4.18 percent at the previous close.