CANADA FX DEBT-C$ gains on hopes of EU action

Tue May 22, 2012 8:32am EDT
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* C$ firmer at C$1.0163 vs US$, or 98.40 U.S. cents
    * Bond prices drift lower across the curve

    By Claire Sibonney	
    TORONTO, May 22 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Tuesday, tracking global
equities higher on speculation that European leaders would agree
on fresh action to tackle the region's debt crisis.	
    After last week's selloff, market participants are looking
to an informal meeting of European Union leaders on Wednesday
for a signal at least of fresh measures to ease the crisis,
though scepticism remains that any deal will be reached.	
    France's new President Francois Hollande is expected to use
the meeting to push for the issuance of euro zone bonds
underwritten by all member states, but Germany's long-standing
opposition to this idea without closer European Union
integration is unlikely to change. 	
    "The focus is on Europe and what's transpiring there and
Canada is just holding ground," said Camilla Sutton, chief
currency strategist at Scotiabank, noting that the Canadian
dollar was outperforming most other majors on the crosses.	
    At 8:12 a.m. (1212 GMT), the Canadian dollar stood at
C$1.0163 versus the U.S. currency, or 98.40 U.S. cents, up from
Friday's North American session close at C$1.0208 versus the
U.S. dollar, or 97.96 U.S. cents. Most Canadian markets were
closed on Monday for the Victoria Day holiday.	
    With little U.S. data due on Tuesday and no major Canadian
data until Wednesday, Sutton said she expects the domestic
currency to trade between C$1.0150-C$1.0250.	
    Investors were mixed about the outlook for the global
economy; there was uncertainty ahead of Wednesday's EU meeting
and in the wake of a Japanese sovereign credit rating cut by
Fitch as a political stalemate dimmed chances the country could
curb its snowballing debt. On the upside, the
Chinese government helped boost sentiment by hinting it was
preparing measures to boost sagging growth in the world's second
largest economy. 	
    Canadian government bonds prices drifted lower across the
curve, mimicking U.S. Treasuries as markets used the upcoming EU
summit as an excuse to take profit on safe-haven assets. 	
    Canada's two-year government bond was down 6 
Canadian cents to yield 1.243 percent, while the benchmark
10-year bond fell 35 Canadian cents to yield 1.934