May 17, 2010
May 8, 2010
CANADA FX DEBT-C$ rises on jobs data, but Greece weighs
* C$ closes at C$1.0438 to US$, 95.80 U.S. cents
* Hits high of C$1.0338 to US$, or 96.73 U.S. cents
* Canada posts historic gain in jobs in April
* Euro zone debt concerns keep C$ gains in check
* Bond prices cool off as stability returns
By Claire Sibonney
TORONTO, May 7 (Reuters) - Canada's dollar bounced back on Friday from the three-month low it hit the day before, boosted by an April jobs report that showed record gains and put more pressure on the Bank of Canada to raise interest rates soon.
Persistent fears of a market meltdown over Greece's debt crisis kept the currency's rise in check, however.
In a Reuters poll conducted after the employment figures were released, all of Canada's primary securities dealers, undaunted by Europe's fiscal crisis, said they expect the Bank of Canada to start raising interest rates in June as the economy roars ahead,. [ID:nN07180411]
All 12 dealers said the central bank would push its key interest rate 25 basis points higher from the current ultra-low 0.25 percent.
Currencies usually strengthen as interest rates rise as higher rates attract capital flows.
"It's going to take a fair bit more volatility I imagine in global markets to dissuade the money markets here from the view that the bank has to tighten rates at some point in the not-too-distant future," said Shaun Osborne, chief currency strategist at TD Securities.
"The economy appears to be firing very much on all cylinders at the moment...we're still very bullish on the medium-term outlook for the Canadian dollar and the specific short-term outlook for the Canadian dollar on the crosses."
The currency rose to a session high of C$1.0338 to the U.S. dollar, or 96.73 U.S. cents, from about C$1.0448, or 95.71 U.S. cents, just before the jobs data's release.
The euro also recovered from a 14-month low against the U.S. dollar as German lawmakers approved a rescue package for Greece while the greenback gained versus the yen after U.S. data showed employment grew at its fastest pace in four years in April. [FRX/]
The Canadian currency finished the North American session at C$1.0438 to the U.S. dollar, or 95.80 U.S. cents, up from its close on Thursday of C$1.0523 to the U.S. dollar, or 95.03 U.S. cents.
The currency was down 2.8 percent for the week, the steepest weekly drop since October.
Yields on overnight index swaps, which trade based on expectations for the central bank's key policy rate, jumped on Friday, showing the market believed credit tightening was more likely after the data than before.
Last month, the Bank of Canada took a first step toward tightening monetary policy by removing a commitment to keep rates at the rock-bottom 0.25 percent until the end of June.
Weighing on Canada's commodity-linked and risk-sensitive currency was oil, which fell for a fourth day in a row, tracking a steep fall in North American stock market indexes due to euro zone worries. [O/R] [.N] [.TO]
On Thursday, the Canadian dollar hit its lowest level since early February and had its steepest intraday drop since the market crash of 2008 on heightened fears that Greece's debt crisis may spread to other euro zone countries and threaten the economic recovery.
As well, Thursday's mayhem across all markets led to speculation about a massive errant trade.
"(Parity with the U.S. dollar) has been put back for quite a while, and this just goes to show how quickly these things can change," said Carlos Leitao, chief economist at Laurentian Bank of Canada in Montreal.
"I think until, and unless, there is some more encouraging news coming out of Europe, there will be downward pressure on the Canadian dollar and upward pressure on the U.S. dollar."
BOND PRICES WEAKER
Canadian government bond prices slumped across the curve, after the strong domestic jobs data hinted at a higher rate environment.
Bond prices typically fall when interest rates go up as their low-yielding fixed payments seems less lucrative compared with rising yields on other investments.
The move down also tracked U.S. Treasures, which fell as safe-haven demand for bonds cooled with some stability returning to Wall Street.
The two-year government bond slipped 5 Canadian cents to C$99.39 to yield 1.805 percent, while the 10-year bond dropped 15 Canadian cents to C$100.00 to yield 3.500 percent. (Reporting by Claire Sibonney; editing by Peter Galloway)
* Hits high of C$1.0338 to US$, or 96.73 U.S. cents
* Canada posts historic gain in jobs in April
* Euro zone debt concerns keep C$ gains in check
* Bond prices cool off as stability returns
By Claire Sibonney
TORONTO, May 7 (Reuters) - Canada's dollar bounced back on Friday from the three-month low it hit the day before, boosted by an April jobs report that showed record gains and put more pressure on the Bank of Canada to raise interest rates soon.
Persistent fears of a market meltdown over Greece's debt crisis kept the currency's rise in check, however.
In a Reuters poll conducted after the employment figures were released, all of Canada's primary securities dealers, undaunted by Europe's fiscal crisis, said they expect the Bank of Canada to start raising interest rates in June as the economy roars ahead,. [ID:nN07180411]
All 12 dealers said the central bank would push its key interest rate 25 basis points higher from the current ultra-low 0.25 percent.
Currencies usually strengthen as interest rates rise as higher rates attract capital flows.
"It's going to take a fair bit more volatility I imagine in global markets to dissuade the money markets here from the view that the bank has to tighten rates at some point in the not-too-distant future," said Shaun Osborne, chief currency strategist at TD Securities.
"The economy appears to be firing very much on all cylinders at the moment...we're still very bullish on the medium-term outlook for the Canadian dollar and the specific short-term outlook for the Canadian dollar on the crosses."
The currency
The euro also recovered from a 14-month low against the U.S. dollar as German lawmakers approved a rescue package for Greece while the greenback gained versus the yen after U.S. data showed employment grew at its fastest pace in four years in April. [FRX/]
The Canadian currency finished the North American session at C$1.0438 to the U.S. dollar, or 95.80 U.S. cents, up from its close on Thursday of C$1.0523 to the U.S. dollar, or 95.03 U.S. cents.
The currency was down 2.8 percent for the week, the steepest weekly drop since October.
Yields on overnight index swaps, which trade based on expectations for the central bank's key policy rate, jumped on Friday, showing the market believed credit tightening was more likely after the data than before.
Last month, the Bank of Canada took a first step toward tightening monetary policy by removing a commitment to keep rates at the rock-bottom 0.25 percent until the end of June.
Weighing on Canada's commodity-linked and risk-sensitive currency was oil, which fell for a fourth day in a row, tracking a steep fall in North American stock market indexes due to euro zone worries. [O/R] [.N] [.TO]
On Thursday, the Canadian dollar hit its lowest level since early February and had its steepest intraday drop since the market crash of 2008 on heightened fears that Greece's debt crisis may spread to other euro zone countries and threaten the economic recovery.
As well, Thursday's mayhem across all markets led to speculation about a massive errant trade.
"(Parity with the U.S. dollar) has been put back for quite a while, and this just goes to show how quickly these things can change," said Carlos Leitao, chief economist at Laurentian Bank of Canada in Montreal.
"I think until, and unless, there is some more encouraging news coming out of Europe, there will be downward pressure on the Canadian dollar and upward pressure on the U.S. dollar."
BOND PRICES WEAKER
Canadian government bond prices slumped across the curve, after the strong domestic jobs data hinted at a higher rate environment.
Bond prices typically fall when interest rates go up as their low-yielding fixed payments seems less lucrative compared with rising yields on other investments.
The move down also tracked U.S. Treasures, which fell as safe-haven demand for bonds cooled with some stability returning to Wall Street.
The two-year government bond
WRAPUP 1-G7 watching Europe, market volatility with concern
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* G7 ministers agree to monitor market
* Canadian minister questions if others will need help
* Obama urges strong financial response to Greek crisis
* US' Geithner talks to regulators on market drops
By David Lawder and Ka Yan Ng
WASHINGTON/TORONTO, May 7 (Reuters) - The Group of Seven rich countries is concerned about Greece's debt problems, a Canadian official said on Friday, and hinted that there may be other countries that will also need help.
Canada is this year's chair of the G7.
Canadian Finance Minister Jim Flaherty would not discuss the substance of talks between G7 finance ministers and central bank governors early on Friday, but said his G7 partners were watching developments closely.
"We are concerned. We're consulting closely with our international partners."
In addition to Canada, the G7 includes Britain, France, Germany, Italy, Japan and the United States.
Echoing comments from other G7 officials, Flaherty told reporters that the G7 believed countries that are borrowing heavily need to rein in fiscal deficits. But he questioned if they could do that on their own.
"It's necessary that, first of all, that the countries involved take the steps they need to take and be clear about that, that they're going to take these steps toward fiscal restraint, fiscal responsibility," he said.
"They will need some help, in all likelihood, in order to manage the issue, as Greece did."
Leaders of euro zone countries on Friday approved a deal by the European Union and International Monetary fund to provide an aid package to Greece, EU sources said. The aid package of 110 billion euros ($147 billion) is to be released to Greece over three years.
The IMF board is to meet on Sunday to discuss its share of the rescue deal.
Greece has promised to slash spending in return, measures which have provoked violent protests in Athens.
U.S. President Barack Obama, in remarks at the White House to highlight stronger-than-forecast U.S. April job growth, said he had discussed developments in the Greek debt situation with German Chancellor Angela Merkel by telephone.
"We agreed on the importance of a strong policy response by the affected countries and a strong financial response from the international community," Obama said.
"I made clear that the United States supports these efforts and will continue to cooperate with European authorities and the IMF during this critical period."
GEITHNER TALKS WITH G7, U.S. REGULATORS
U.S. Treasury Secretary Timothy Geithner also participated in the G7 call, but a Treasury spokesman had no immediate comment on the outcome.
A U.S. Treasury official earlier had described the call as being "focused on European leaders updating the G7 finance ministers and central bank governors" on Greece's debt woes.
Geithner also held conference calls on Friday morning with the heads of two U.S. market regulators, the Securities and Exchange Commission and the Commodity Futures Trading Commission, and with Federal Reserve officials.
The SEC and CFTC are investigating Thursday's sudden stock market plunge, which some market sources say may have been caused by an errant trade by a large bank. An Obama administration official said the Treasury Department was closely monitoring the probe.
The G7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States. It has lost significance as the world puts more stress on the broader Group of 20 industrialized and emerging economies, but retains a role in issues like the European debt crisis. (Additional reporting by Sumeet Desai, Jeff Mason, Leika Kihara in Tokyo and Gernot Heller in Berlin; Editing by Chizu Nomiyama)
* Canadian minister questions if others will need help
* Obama urges strong financial response to Greek crisis
* US' Geithner talks to regulators on market drops
By David Lawder and Ka Yan Ng
WASHINGTON/TORONTO, May 7 (Reuters) - The Group of Seven rich countries is concerned about Greece's debt problems, a Canadian official said on Friday, and hinted that there may be other countries that will also need help.
Canada is this year's chair of the G7.
Canadian Finance Minister Jim Flaherty would not discuss the substance of talks between G7 finance ministers and central bank governors early on Friday, but said his G7 partners were watching developments closely.
"We are concerned. We're consulting closely with our international partners."
In addition to Canada, the G7 includes Britain, France, Germany, Italy, Japan and the United States.
Echoing comments from other G7 officials, Flaherty told reporters that the G7 believed countries that are borrowing heavily need to rein in fiscal deficits. But he questioned if they could do that on their own.
"It's necessary that, first of all, that the countries involved take the steps they need to take and be clear about that, that they're going to take these steps toward fiscal restraint, fiscal responsibility," he said.
"They will need some help, in all likelihood, in order to manage the issue, as Greece did."
Leaders of euro zone countries on Friday approved a deal by the European Union and International Monetary fund to provide an aid package to Greece, EU sources said. The aid package of 110 billion euros ($147 billion) is to be released to Greece over three years.
The IMF board is to meet on Sunday to discuss its share of the rescue deal.
Greece has promised to slash spending in return, measures which have provoked violent protests in Athens.
U.S. President Barack Obama, in remarks at the White House to highlight stronger-than-forecast U.S. April job growth, said he had discussed developments in the Greek debt situation with German Chancellor Angela Merkel by telephone.
"We agreed on the importance of a strong policy response by the affected countries and a strong financial response from the international community," Obama said.
"I made clear that the United States supports these efforts and will continue to cooperate with European authorities and the IMF during this critical period."
GEITHNER TALKS WITH G7, U.S. REGULATORS
U.S. Treasury Secretary Timothy Geithner also participated in the G7 call, but a Treasury spokesman had no immediate comment on the outcome.
A U.S. Treasury official earlier had described the call as being "focused on European leaders updating the G7 finance ministers and central bank governors" on Greece's debt woes.
Geithner also held conference calls on Friday morning with the heads of two U.S. market regulators, the Securities and Exchange Commission and the Commodity Futures Trading Commission, and with Federal Reserve officials.
The SEC and CFTC are investigating Thursday's sudden stock market plunge, which some market sources say may have been caused by an errant trade by a large bank. An Obama administration official said the Treasury Department was closely monitoring the probe.
The G7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States. It has lost significance as the world puts more stress on the broader Group of 20 industrialized and emerging economies, but retains a role in issues like the European debt crisis. (Additional reporting by Sumeet Desai, Jeff Mason, Leika Kihara in Tokyo and Gernot Heller in Berlin; Editing by Chizu Nomiyama)
EU finance mins to discuss crisis mechanism Sunday
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BRUSSELS, May 7 (Reuters) - Finance ministers from the 27 European Union member states will meet in Brussels on Sunday to try to agree a mechanism for helping EU countries stave off future debt crises, EU sources said on Friday.
The meeting is scheduled for 1400 GMT, and ministers hope to agree a strong statement before financial markets reopen on Monday, the sources said. (Reporting by Ilona Wissenbach and Julien Toye
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