CANADA FX-C$ stronger as Spain supports, but weighed by rate view

Wed Oct 17, 2012 8:21am EDT
 
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* C$ at C$0.9842 to US$, or $1.0160
    * Moody's keeps Spain at investment grade, boosts sentiment
    * Bank of Canada's less hawkish tone caps C$ gains

    By Alastair Sharp
    TORONTO, Oct 17 (Reuters) - The Canadian dollar strengthened
against the U.S. currency on Wednesday as Spain's avoidance of a
rating downgrade boosted sentiment, though gains were limited by
a recent Bank of Canada speech which investors interpreted as
less hawkish on rates.
    Credit rating agency Moody's affirmed Spain's investment
grade rating late on Tuesday, assuaging widespread fears that
Spain could be cut to 'junk' status, although it based its
decision on the assumption that Madrid would ask for help in
holding down its borrowing costs. 
    "Stronger risk appetite on the back of Moody's decision not
to downgrade Spain is pretty much lifting all risk assets, the
Canadian dollar is one of those," said Benjamin Reitzes,
senior economist and foreign exchange strategist at BMO Capital
Markets. 
    "That's why you're getting some strength, not to the same
extent as some other currencies, that's probably a lingering
impact from Carney's speech the other day."
    At 8:04 a.m. (1204 GMT) the Canadian dollar was
trading at C$0.9842 to the greenback, or $1.0160, compared with
C$0.9868, or $1.0134, at Tuesday's North American close.
    The Canadian currency hit an almost two-week low on Tuesday
as investors digested a speech from the governor of the Bank of
Canada in which he did not reference an intention to hike rates
once conditions allow. 
    Meanwhile, the Australian dollar hit a two-week high against
the greenback and the euro was at its highest in a month.