CANADA FX DEBT-C$ strengthens on commodities, Spain

Thu Sep 27, 2012 4:26pm EDT
 
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* C$ at C$0.9809 vs US$, or $1.0195
    * Spain announces economic reforms and 2013 budget
    * China's central bank adds biggest weekly cash injection
    * BoC switching to long-term bonds to lock in rates

    By Solarina Ho
    TORONTO, Sept 27 (Reuters) - Canada's dollar finished
stronger against the U.S. currency on Thursday, tracking gains
in commodity prices and stock markets, helped by Spain's latest
efforts to deal with its debt crisis and signs China might take
more action to boost its economy.
    Spain, the euro zone's fourth-largest economy, announced a
detailed timetable for economic reforms and a tough 2013 budget
based mostly on spending cuts in what many see as an effort to
pre-empt the likely conditions of an international bailout.
 
    The market "realized well, maybe, they don't have go to the
EU (European Union) and it's not such a bad thing. I think
that's really what turned the market around," said Steve Butler,
managing director of foreign exchange trading at Scotiabank.
    "The biggest worry is that if they go to the EU and they
really get their backs to the wall then they're stuck with an
austerity program that may or may not work for them. So if they
can do it themselves, then everybody feels like that's a better
solution."
    Riskier assets were already cheered overnight by news that
China's central bank had added its biggest weekly cash injection
in history, aimed at preventing a potential short-term liquidity
crunch at commercial banks. The move fueled talk that China may
take steps to boost the country's weak stock market and sparked
a global equities rally. 
    "The headline overnight got the market on the right foot,"
said Butler.
    "With that we've seen stocks in positive territory all day,
but Canada wasn't really appreciating ... we probably should've
been doing better earlier in the day and we finally caught up."
    The Canadian dollar was trading at C$0.9809 to the
U.S. dollar, or $1.0195, firmer than Wednesday's North American
session close of C$0.9852, or $1.0150. It touched a session high
of C$0.9792,or $1.0212 earlier. 
    The currency was also supported by a jump in the price of
gold and oil. Oil prices rose as tensions between Iran and the
West stoked concerns about crude supplies, while refinery
maintenance and low inventory levels drove U.S. gasoline futures
to their highest since April.  
    An array of U.S. data, meanwhile, painted a mixed economic
picture, putting some pressure on the U.S. dollar.
 
    
    BOC SHIFT TO LONG BONDS
    The Bank of Canada announced that the government will
reallocate short-term bond issuance towards long-term bonds as
an extension of plans announced in the March budget to lock in
funding at attractive rates. 
    Canadian government bond prices were mostly lower. 
    The two-year bond was off 2 Canadian cents to
yield 1.100 percent, while the benchmark 10-year bond
 slipped 8 Canadian cents, yielding 1.753 percent.