December 9, 2011 / 1:53 PM / 6 years ago

Canadian dollar steady after EU deal, China report

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TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Friday morning after European Union leaders agreed on measures that only partially addressed the euro zone's crippling debt crisis.

The summit agreed on stricter budget rules for euro zone countries but failed to get all member countries to agree on changes to the EU treaty. Investors initially appeared to embrace the deal, but many risk assets, including oil, subsequently pared gains.

The market was also hungry for details after reacting positively to speculation that a new Chinese investment vehicle could provide much-needed funding to heavily indebted euro zone countries.

"You're going to see continued price oscillation on the back of the developing story and it's all about Europe, it's completely and totally about Europe," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

"There was some earlier cautious optimism and it's now being scaled back, and we could be headed for more risk aversion depending on how the market takes the balance of news that's going to be coming out likely in the next hour or two."

Data that showed Canada posted a surprise trade deficit of C$885 million in October, did little to help the currency.

At 9:41 a.m., the Canadian dollar was at C$1.0228 to the U.S. dollar, or 97.78 U.S. cents, flat from Thursday's North American session close of C$1.0226 versus the U.S. dollar, or 97.79 U.S. cents, after the currency's biggest one-day drop in a month.

Spitz said the U.S. dollar's overnight highs against the Canadian dollar around C$1.0260 will be seen as initial resistance in funds, with stronger resistance around C$1.0300 to

C$1.0350.

Canadian government bond prices eased, unwinding some of Thursday's rally in which the 10-year yield hit a multi-decade low and the 30-year yield touch a record low.

The two-year bond slipped 1 Canadian cent to yield 0.875 percent, while the 10-year bond lost 17 Canadian cents to yield 2.017 percent, and the Canadian 30-year bond dropped 38 Canadian cents to yield 2.596 percent.

Reporting By Claire Sibonney; Editing by Peter Galloway

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