Reuters: US Dollar Report: CANADA FX DEBT-C$ firms with stocks, commodities; eye on EU summit

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CANADA FX DEBT-C$ firms with stocks, commodities; eye on EU summit Jun 26th 2012, 20:24 Tweet Share this Email Print Tue Jun 26, 2012 4:24pm EDT * Currency ends up at C$1.0240 vs US$ or 97.66 U.S. cents * C$ higher with North American equities, commodities * Bond prices slip across curve By Claire Sibonney TORONTO, June 26 (Reuters) - Canada's dollar edged up against its U.S. counterpart on Tuesday, tracking North American equities and commodities higher, but the gains were seen as fragile before a European Union debt crisis summit this week. Wall Street marked a modest rebound on the back of upbeat data on home prices, but trading is expected to be volatile ahead of the two-day meeting of EU leaders that begins Thursday. "The highest correlation for the Canadian dollar right now is the U.S. stock market. Throughout this year it's been higher than any other currency pair," said Adam Button, currency analyst at ForexLive in Montreal. Although investors do not have high hopes about the EU summit, any progress made at the meeting in terms of heightening cooperation to tackle the region's 30-month long debt crunch co u ld bring back appetite for risky assets. "It will be a watershed moment for the rest of summer trading," added Button. "This will set us up for a long period of disappointment and Canadian dollar weakness or potentially some stability and optimism which would lead to the Canadian dollar back over parity." The Canadian currency ended the North American session at C$1.0240 to the greenback, or 97.66 U.S. cents, stronger than Monday's finish at C$1.0292 to the greenback, or 97.16 U.S. cents. In the short-term, Button said the currency will most likely trade between C$1.01 versus the U.S. dollar, or 99 U.S. cents, and C$1.04, or 96.15 U.S. cents. The Canadian dollar has had a bumpy ride so far this year, swinging from its high above parity with the greenback at $1.02 in April to its low below 96 U.S. cents a few weeks ago. Some analysts expect an even sharper depreciation, despite the fact that the currency is down less than 1 percent year to date. In a research note on Tuesday, Capital Economics predicted the Canadian dollar will weaken to 92 U.S. cents by the end of this year and 86 U.S. cents by the end of 2013. The research firm said the forecast was based partly on the prospect of further declines in commodity prices. Canadian bond prices retreated across the curve, largely mimicking U.S. Treasuries, as investors pushed for price concessions in auctions of new U.S. debt this week. The two-year Canadian government bond fell 4 Canadian cents to yield 1.01 percent, while the benchmark 10-year bond lost 19 Canadian cents to yield 1.748 percent. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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