CANADA FX DEBT-C$ gets a lift from firm U.S. data

Tue May 1, 2012 4:54pm EDT
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* C$ at C$0.9858 vs US$, or $1.0144
    * BoC repeats rates may need to rise
    * C$ also firm against AUD after rate cut there
    * Bond prices mixed across curve, outperform U.S.

    By Jennifer Kwan	
    TORONTO, May 1 (Reuters) - Canada's dollar climbed against
its U.S. counterpart on Tuesday after upbeat U.S. manufacturing
data helped ease investor concerns about the economic outlook of
Canada's largest trading partner.	
    The U.S. Institute for Supply Management report showed the
pace of growth in the U.S. manufacturing sector picked up in
April to its highest level in 10 months, suggesting the economy
still had some resilience after indications it had lost momentum
at the start of the second quarter. 	
    The data helped to boost assets perceived to be riskier such
as equities and commodity-linked currencies, pushing the Dow to
its highest level since December 2007. 	
    "We got a bit of a lift form the better-than-expected U.S.
ISM numbers, which put a bright spot on global growth and helped
put back a little back on the table in terms of expectations for
rate hikes in Canada," said Avery Shenfeld, chief economist at
CIBC World Markets.	
    Canada's currency slumped on Monday after
weaker-than-expected domestic growth data reduced interest rate
hike expectations. [I D:nL1E8FU3PH] 	
    The currency had hit a seven-month high on Friday, partly
due to recent signs that the Bank of Canada is closer to
tightening monetary policy.	
    The central bank had surprised investors on April 17 with a
more positive domestic economic outlook and an explicit warning
that it may have to start raising rates again. Bank of Canada
Governor Mark Carney on Tuesday reiterated that message.
    The Canadian currency finished the day at C$0.9858
against the greenback, or $1.0144, after climbing as high as
C$0.9832 versus the U.S. dollar, or $1.0171.	
    On Monday it closed at C$0.9879 versus the U.S. dollar, or
    The Canadian dollar's recovery on Tuesday came after the
Reserve Bank of Australia surprised markets overnight with a
50-basis point rate cut. 	
    Canada's currency strengthened against the Australian
 and New Zealand dollars after the move, as
well as the Japanese yen.	
    David Bradley, a director of foreign exchange trading at
Scotiabank, said he sees the Canadian currency trading in a
tight range of C$0.9800 to C$0.9900 versus the greenback in the
next couple of days.	
    Canadian bond prices outperformed U.S. Treasuries with
Canada's two-year bond up 2 Canadian cents higher to
yield 1.329 percent, while the benchmark 10-year bond
 fell 8 Canadian cents to yield 2.046 percent.