CANADA FX DEBT-C$ firms slightly, helped by China hopes, oil

Tue Oct 9, 2012 9:49am EDT
 
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* Firms to C$0.9759 to the US$, or $1.0247
    * China stimulus hopes support
    * Higher oil prices also benefit currency

    By Alastair Sharp
    TORONTO, Oct 9 (Reuters) - Canada's dollar firmed slightly
versus its U.S. counterpart on Tuesday as traders looked beyond
the International Monetary Fund's more pessimistic view of the
global economic outlook and bet on China to kick-start demand.
    The IMF said the global economic slowdown is worsening as it
cut its growth forecasts for the second time since April and
warned U.S. and European policymakers that failure to fix their
economic ills would prolong the slump. 
    Yet by 9:25 a.m. (1315 GMT) the Canadian dollar had
strengthened to C$0.9759 to the U.S. dollar, or $1.0247, from a
close of C$0.9789, or C$1.0216, on Friday.
    Most Canadian currency traders were away from their desks on
Monday for the Canadian Thanksgiving holiday.
    "It's a hope that the global economy is not getting worse,
that's what the view of the market is," said Charles St-Arnaud,
Canadian economist and currency strategist at Nomura Securities
in New York.
    "The IMF is behind the curve, everyone knows the global
economy is slowing, and I think there was some relief that the
downgrade was in line with what markets were expecting," he
said.
    Helping offset the dire IMF outlook, China's central bank
injected more cash into the country's money markets, which
encouraged expectations that the world's second largest economy
would take further steps to spark growth. 
    Energy markets were also supportive. Oil rose to around $113
a barrel on Tuesday after two days of losses, with tensions in
the Middle East and the risk of supply disruptions outweighing
concerns about sluggish global demand. 
    Canada is a major oil exporter, and tight energy market
prices tend to support its currency.
    Canadian government bond prices were broadly lower, with the
two-year bond slipping 3 Canadian cents to yield
1.140 percent, while the benchmark 10-year bond fell
by 10 Canadian cents, to yield 1.818 percent.