CANADA FX DEBT-C$ firms on China rate cut, Spain

Thu Jun 7, 2012 8:42am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0234 vs US$, or 97.71 U.S. cents
    * China rate cut boosts growth currencies
    * Spanish bond auction eases euro zone debt fears
    * Bond prices mostly lower

    By Jon Cook	
    TORONTO, June 7 (Reuters) - Canada's dollar advanced against
its U.S. counterpart on Thursday as global slowdown fears eased
after China's central bank cut interest rates, European
policymakers appeared poised to rescue Spanish banks and
expectations rose that the U.S. Federal Reserve would embark on
more stimulus measures.	
    China's central bank cut benchmark interest rates by 25
basis points in a surprise move on Thursday to shore up
slackening economic growth, its first rate cut since the depths
of the 2008/09 financial crisis. 	
    The move by China was a boost for the growth-linked
currencies in Canada, New Zealand and Australia, said Chris
Applin, senior dealer at Canadian Forex in London. The
Australian dollar climbed to a fresh three-week high of
US$0.9993.	
    The Canadian dollar reached a session high of
C$1.0226 against the greenback, or 97.79 U.S. cents, its
strongest since May 30.	
    "That's given the commodity currencies a bit of a lift this
morning," said Applin. "Central banks are willing to ease in
these kinds of times as they appreciate that conditions are far
from ideal."	
    After surging to its biggest single-day gain in more than
six months on Wednesday, the Canadian dollar extended gains on
Thursday.	
    At 8:26 a.m. (1226 GMT), the Canadian currency was
at C$1.0234 versus the U.S. dollar, or 97.71 U.S. cents, up from
Wednesday's close at C$1.0279 against the U.S. dollar, or 97.29
U.S. cents.	
    News in Europe was also upbeat, as Spain soothed fears on
Thursday that it is being cut off from financial markets by
raising more than 2 billion euros ($2.5 billion) at a bond
auction, although it had to pay dearly. 	
    The auction followed a report on Wednesday that German and
European Union officials were urgently looking at how to pump
cash into Spanish banks crippled by the collapse of a real
estate bubble without forcing Madrid to submit its government
finances to international strictures.	
    Since last week's U.S. job data, there has been rising
speculation of more stimulus measures from global central banks,
though the European Central Bank had dashed hopes that it would
take any near-term action on Wednesday. 	
    The Bank of Canada held rates at 1 percent on Tuesday but
the tone from its statement signaled that its next move would be
a rate hike. 	
    Currency traders were looking ahead to what Fed Chairman Ben
Bernanke will say in testimony to a congressional committee on
Thursday for any further signals of another round of
quantitative easing.	
    Hopes of more stimulus were offset somewhat by positive U.S.
data on Thursday, as the number of Americans lining up for new
jobless benefits fell last week for the first time since April.
  	
    "What Bernanke says is going to be key," said Applin.
"Growth prospects in the U.S. are obviously key for Canada and
the prospect of QE3 is not particularly good for the U.S. dollar
and since yesterday the (U.S.) dollar has been sold off on that
basis."	
    Applin said the Canadian dollar was likely to stay within a
range between C$1.0250 and C$1.0350 for the next 24 hours.	
    Canadian bond prices were mostly lower. The two-year bond
 fell 3 Canadian cents to yield 1.066 percent, while
the benchmark 10-year bond dropped 3 Canadian cents
to yield 1.812 percent.