CANADA FX DEBT-C$ rallies on hopes for central bank moves
* C$ at $1.0179 vs the US$, or 98.24 U.S. cents * C$ touches highest point since May 22 * All eyes on central banks * Bond prices mostly lower By Allison Martell TORONTO, June 19 (Reuters) - The Canadian dollar firmed on Tuesday as concerns about the disruptive impact of the euro zone debt crisis on global economic growth encouraged talk that major central banks would respond with stimulative measures. Canada's currency rose as high as C$1.0169 to the U.S. dollar, its strongest point since May 22, as Canada's main stock index rallied to a five-week high and U.S. equities rose. "In general, I think it's the expectation of continued stimulus by the Fed. Clearly they see that there's some headwinds in the global economy," said Blake Jespersen, managing director of foreign exchange sales at BMO Capital Markets. But Jespersen also said volume was low, with markets waiting to see what announcements are made by the U.S. Federal Reserve on Wednesday after its Federal Open Market Committee ends a two-day meeting. The euro rose against the dollar and stock markets gained on Tuesday as investors bet the Fed will unveil more stimulus to support a flagging recovery. A European Union official said international lenders are open to renegotiating the terms of Greece's bailout deal because circumstances have changed, further boosting the euro against the greenback. At the same time, a surprise fall in British inflation raised hopes that the Bank of England will take steps to support the UK's economy. Analysts expect the Fed to extend its long-term bond-buying through "Operation Twist" by a few months from the current deadline in June. "Like most on the Street, we're looking for the Fed to introduce further easing measures at the conclusion of its two-day FOMC meeting tomorrow," Jack Spitz, managing director of foreign exchange at National Bank Financial, wrote in a note to clients. Spitz added that a simple extension of Operation Twist might not be enough to spark a rally in risk appetite beyond the very short term. At about 1 p.m. (1700 GMT) the Canadian dollar was at C$1.0179 versus the U.S. dollar, or 98.24 U.S. cents, compared with Monday's close at C$1.0241, or 97.65 U.S. cents. Canadian bond prices were mostly lower across the curve. Canada's two-year bond fell 11 Canadian cents to yield 1.032 percent, while the benchmark 10-year bond fell 50 Canadian cents to yield 1.768 percent.
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