CANADA FX DEBT-C$ rallies on stimulus optimism

Wed Jun 6, 2012 1:58pm EDT
 
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* C$ touches high C$1.0276 vs US$, or 97.31 U.S. cents
    * ECB holds rates at 1 percent
    * Bond prices lower across curve

    By Jennifer Kwan	
    TORONTO, June 6 (Reuters) - Canada's dollar climbed to its
highest level against its U.S. counterpart in nearly a week on
Wednesday as investor expectations that major central banks may
embark on a wave of policy easing sparked a rally in equity and
commodity markets.	
    U.S. and global stocks and the euro were also buoyed as
European officials explored ways to rescue Spain's debt-laden
banks. 	
    "There's a sense that the European Central Bank, while they
didn't act today, said that there would be some willingness at
least for them to contemplate providing stimulus should data
begin to deteriorate," said David Tulk, chief Canada macro
strategist at TD Securities.	
    "So the expectation that we get a bit more policy support I
think has helped the risk sentiment more generally rebound. And
that's given the euro a bit of a lift, and pushed the Canadian
dollar higher as well."	
    The Canadian dollar climbed to a session high of
C$1.0276 against the greenback, or 97.31 U.S. cents, its
strongest since May 31, and outperformed most of its G10
currency peers.	
    The European Central Bank resisted pressure to provide more
support for the euro zone's ailing economy at its regular
monthly policy meeting, holding its main interest rate steady at
1 percent.	
    But comments from ECB President Mario Draghi dashed hopes
for more long-term, cheap loans, saying it was not up to the ECB
to make up for other institutions' lack of action.
  	
    At 1:40 p.m. (1740 GMT), the Canadian dollar was at
C$1.0286 against the greenback, or 97.22 U.S. cents, up from
Tuesday's close at C$1.0380 against the U.S. dollar, or 96.34
U.S. cents.	
    After the ECB, focus shifts to U.S. Federal Reserve Chairman
Ben Bernanke's testimony to a U.S. congressional committee on
Thursday for signals of further stimulus measures.	
    Canadian bond markets retreated across the curve. The
two-year bond fell 13 Canadian cents to yield 1.052
percent, while the benchmark 10-year bond dropped 45
Canadian cents to yield 1.788 percent, rebounding from recent
record low levels. 	
    Elsewhere, the Bank of Canada said on Wednesday its most
recent auction of bonds due in 2022 produced an average yield of
1.765 percent, a record low for the auction.