Reuters: US Dollar Report: CANADA FX DEBT-C$ strengthens as U.S. data supports

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CANADA FX DEBT-C$ strengthens as U.S. data supports Feb 27th 2013, 22:24 Wed Feb 27, 2013 5:24pm EST * C$ at C$1.0230 vs US$, or 97.75 U.S. cents * U.S. housing, durable goods data lifts sentiment * Traders positioning due to CNOOC acquisition of Nexen * Next BoC rate hike seen Q1 2014-Reuters poll By Solarina Ho TORONTO, Feb 27 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as U.S. economic data bolstered investor sentiment which had been battered recently by the sluggish domestic economy and renewed worries about Europe. The currency tracked Wall Street equity markets, which rallied as Federal Reserve Chairman Ben Bernanke reaffirmed his strong support for the U.S. central bank's stimulus efforts. Data on U.S. housing and durable goods also buoyed markets. "There has been a general trend away from the U.S. dollar throughout the North American session, much of it has to do with the pickup in the equity markets," said Jack Spitz, managing director of foreign exchange at National Bank Financial, attributing the strength the data and comments by the central bank chiefs. European Central Bank President Mario Draghi said the ECB was not about to remove the crisis measures it deployed to help the ailing euro zone economy. "The market seems to be adapting to Italy to a certain degree. the lower volatility has contributed to U.S. dollar weakness and by extension, Canadian dollar strength," said Spitz. Worries that an uncertain outcome from the election in Italy, the euro zone's third-largest economy, will fragment the government and endanger the country's current economic reform program, were soothed following solid demand at an auction of Italian government debt. The Canadian dollar closed the North American session at C$1.0230 against the greenback, or 97.75 U.S. cents, stronger than Tuesday's North American close at C$1.0264, or 97.43 U.S. cents. The loonie had experienced seven straight sessions of weakness on the heels of unexpectedly weak domestic data before eking out a negligible gain on Tuesday. "Without the good U.S. news, I think people would be more concerned about how Canada would fare," said Don Mikolich, executive director, foreign exchange sales At CIBC World Markets. The recent weak numbers have pushed expectations for the Bank of Canada's next interest rate hike all the way to the first quarter of 2014, according to a Reuters poll on Wednesday. The Canadian dollar was mixed against other currencies, outperforming the Australian dollar, but underperforming the euro. National Bank's Spitz noted there was also some positioning ahead of what could be positive and potentially significant flow for Canada due to the CNOOC's Ltd acquisition of Nexen Inc and the delisting of Nexen stock. There is speculation some Canadian investors will convert their U.S. dollar proceeds from the takeover into Canadian dollars. Traders are now looking ahead to fourth-quarter Canadian GDP data on Friday. "GDP suggests a bid to USD/CAD leading into the data because the data is universally expected to be soft. But that's more or less likely already discounted into the price of USD/CAD," said Spitz. Government bond prices were mixed. The 2-year bond climbed 1.5 Canadian cents to yield 1.003 percent. The benchmark 10-year bond was off 5 Canadian cents to yield 1.867 percent. Link this Share this Digg this Email Reprints

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