Reuters: US Dollar Report: CANADA FX DEBT-C$ buoyed by ECB talk, China data

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CANADA FX DEBT-C$ buoyed by ECB talk, China data Jan 10th 2013, 21:24 Thu Jan 10, 2013 4:24pm EST * C$ ends stronger at $0.9845 vs US$, or $1.0157 * Bond prices ease, underperform Treasuries By Claire Sibonney TORONTO, Jan 10 (Reuters) - The Canadian dollar climbed to a more than one-week high against the greenback on Thursday as strong Chinese trade data boosted commodity-linked currencies, while some encouraging remarks by the European Central Bank added to pressure against the U.S. dollar. The euro zone economy will recover later in 2013 and there are already some signs of stabilization, the European Central Bank said on Thursday after it unanimously held interest rates at a record low. "There's been a fair bit of price action on the back of the stop-loss buying of the euro and it comes at the expense of the U.S. dollar and the Japanese yen," said Jack Spitz, managing director of foreign exchange at National Bank Financial. The euro catapulted to an 18-month high versus the yen and hit a one-week peak against the U.S. and Canadian dollars after the ECB gave no indication of cutting. Meanwhile, the Canadian currency appeared to brush off disappointing domestic indicators. Data on Thursday showed the value of building permits issued in Canada during November tumbled to the lowest level since January 2012 due mainly to a slowdown in housing and non-housing construction in the most populous province, Ontario. "The huge miss on building permits this morning was swept up in the fray," added Spitz. "It should have had more influence than it did but it just happened to coincide with Draghi's press conference so it was skimmed from an influence point of view." On the upside for Canada's resource-driven currency, however, China surprised most observers by reporting its exports had rebounded sharply in December to hit a seven-month high, with imports growing at double the expected rate. The Canadian dollar ended the North American session at C$0.9845 versus its U.S. counterpart, or $1.0157, compared with C$0.9877, or $1.0125 at Wednesday's close. Jeremy Stretch, head of currency strategy at CIBC World Markets in London, noted some near-term resistance for the Canadian dollar at the bottom of the recent range around C$0.9820. Overall, the Canadian dollar was expected to remain firm despite the fact that January has been negative for the currency in seven of the last 10 years. Many analysts and market players expect the Canadian dollar to keep climbing well into 2013. "The Canadian dollar is likely to grind higher over the coming months due to diminishing risks of a European sovereign debt meltdown, better than expected growth from China, a bullish bias to domestic interest rates and a sense that the USA will find a way to skirt around the debt ceiling issue," said Michael O'Neill, vice president of FX trading at Jitneytrade. Investors will be paying close attention to Canadian trade data for November on Friday and a speech late on Thursday by Tiff Macklem, a senior Bank of Canada official widely tipped to replace the departing Governor Mark Carney. "His words are going to be forensically examined as markets attempt to understand if and how he will be running policy if he were to be the next governor and of course that's still an if rather than a certainty," said CIBC's Stretch. Canadian bond prices eased across the curve, mostly underperforming U.S. Treasuries. The two-year bond was off 4 Canadian cents to yield 1.186 percent, while the benchmark 10-year bond was down 42 Canadian cents to yield 1.953 percent. Link this Share this Digg this Email Reprints

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