CANADA FX DEBT-C$ touches 3-week high after Bernanke comments
* C$ at C$1.0385 vs US$, or 96.29 U.S. cents * Markets react to more dovish than expected Bernanke * Global markets rally on U.S. central bank stance * Bond prices rise across curve By Solarina Ho TORONTO, July 11 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday, up by as much as two cents at one point, as the greenback tumbled after U.S. Federal Reserve Chairman Ben Bernanke said on Wednesday the Fed was not ready to abandon its stimulus measures. Shares and bonds rallied globally, while the S&P 500 and Dow industrials closed at record highs. But the U.S. dollar fell sharply as markets reassessed when the U.S. central bank would wind down its asset purchase program. "Quite a few fireworks yesterday. Despite the market action that was quite dramatic, I think the bigger picture hasn't really changed," said Greg Moore, FX Strategist at TD Securities. "Bernanke's comments ... were quite broad and still consistent with the message we already knew." Bernanke said in a speech after markets closed on Wednesday that "highly accommodative policy is needed for the foreseeable future," adding the U.S. unemployment rate may be overstating the health of the labor market. In the minutes of their late-June meeting released earlier on Wednesday, about half of the Fed's policymakers felt the bond-buying measures should be brought to a halt by year-end, but that many of them wanted reassurance that the U.S. jobs recovery was on solid ground before any policy retreat. "Bernanke didn't give us any new information," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. "He's doing his best to tell markets tapering QE (quantitative easing), and ending QE, is not the same thing as raising rates. I think that's something the markets really haven't been able to grasp entirely." The Canadian dollar finished the North American session at C$1.0385 versus its U.S. counterpart, or 96.29 U.S. cents. That was sharply higher than the Bank of Canada's posted close on Wednesday, which came before Bernanke's speech, at C$1.0518, or 95.08 U.S. cents. The Canadian dollar, which outperformed most major currencies on Thursday, touched as high as C$1.0326, its strongest level in three weeks. "This price action is a little bit overdone in my mind," said Moore, noting that TD Securities has a target of C$1.06 for USD/CAD in the second and third quarter. "We hit our target on Friday with the payrolls number. With this pullback, we actually see this as a buying opportunity for USD/CAD." A Reuters poll of economists released on Wednesday showed the Bank of Canada is expected to keep its bias toward tightening on July 17, its first rate-decision date under new Governor Stephen Poloz, but slow growth and low inflation mean that an actual rate hike will not happen untill the fourth quarter of 2014. Prices for Canadian government debt were higher across the maturity curve, with the two-year bond rising 3.5 Canadian cents to yield 1.133 percent. The benchmark 10-year bond climbed 45 Canadian cents, yielding 2.439 percent.
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