February 16, 2012 / 9:35 PM / in 6 years

CANADA FX DEBT-C$ lifted by U.S. data, Greek hope

* C$ ends at C$0.9965 vs US$, or $1.0035

* Bond prices lower across curve

* Market awaits Canada inflation data

By Jennifer Kwan

TORONTO, Feb 16 (Reuters) - The Canadian dollar rose against the U.S. currency on Thursday, surging back from a two-week low earlier in the day, on upbeat U.S. economic data and optimism that Greece has done enough to secure a second bailout.

The currency tracked world stocks and the euro higher after Greek officials said they hoped that euro zone finance ministers would sign off on the bailout deal on Monday. That would be a month before Athens needs to repay 14.5 billion euros of debt obligations due on March 20.

Also supporting the currency was a rally in U.S. stocks, which soared on upbeat U.S. jobs, manufacturing and housing data.

At its peak of C$0.9954 versus the greenback, or $1.0046, the Canadian dollar was up nearly a cent from its lows of the session, helped up by a rally in the euro and commodities, said Blake Jespersen, managing director of foreign exchange sales at BMO Capital Markets.

“All that helped lift the Canadian dollar. Not a Canadian dollar story, but it did follow the moves in other commodity-based currencies and the overall risk sentiment,” he said.

The Canadian dollar ended at C$0.9965 versus the U.S. dollar, or $1.0035 , up from Wednesday’s North American close of C$0.9991 versus the U.S. dollar, or $1.0009.

The currency fell as low as C$1.0052, or 99.48 U.S. cents, early in the session, its weakest level since Jan. 31, in part, after Moody’s warned it might cut the credit ratings of 17 global and 114 European financial institutions.

Jespersen said he sees the Canadian dollar trading in a short-term range of C$0.9950 to C$1.0050 against the greenback.

Next up, markets will focus on Canadian inflation data for January, due on Friday.

Total annual inflation is expected to hold steady at a rate close to the Bank of Canada’s 2 percent target and well within its control range of 1-3 percent, doing little to change the outlook of low interest rates for a prolonged period.

“I suspect that what we get is a contained report and that we quickly shift our attention to the U.S. and Europe,” said Camilla Sutton, chief currency strategist at Scotia Capital.

BONDS LOWER WITH U.S. TREASURIES

Canadian bond prices shrugged off domestic factory data and dropped in tandem with U.S. Treasuries, which pulled back as Greek optimism tamed investor appetite for safe-haven government debt.

Data showed Canadian manufacturing sales rose for the fifth time in six months in December, though the 0.6 percent increase fell short of expectations for a 1.5 percent rise.

“If you are going to trade off the data it’s going to be the U.S. data rather than the domestic data,” said Ian Pollick, fixed income strategist at RBC Capital Markets.

Canada’s two-year bond retreated 3 Canadian cents to yield 1.070 percent. The 10-year bond fell 17 Canadian cents to yield 2.033 percent.

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