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