CANADA FX DEBT-C$ gets no boost from equities rally

Wed Apr 11, 2012 5:13pm EDT
 
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* C$ ends at C$1.0042 vs US$, or 99.58 U.S. cents
    * Equity markets rally as euro zone debt fears ease
    * C$ closely linked to US$
    * Canadian bond prices fall

    By Jon Cook	
    TORONTO, April 11 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Wednesday, failing to
rise with other commodity-linked currencies as equity markets
rebounded after concerns eased about an escalation of Europe's
debt crisis.	
    The euro firmed against the U.S. dollar after remarks from
an European Central Bank policymaker raised the possibility of
more bond-buying and Spanish and Italian bond yields fell.
  	
    Canada's resource-heavy currency normally tracks riskier
equities, but its fate has become increasingly intertwined with
the U.S. dollar as economic conditions in Europe deteriorated
late last year and investors focused on a "buy North America"
theme, said Greg Moore, a foreign exchange strategist at TD
Securities.	
    "The Canadian dollar is a bit of an outlier in today's
session," he said. "You have most other risk currencies
benefiting quite a bit from higher equities and tighter euro
zone sovereign spreads, but the Canadian dollar is still
connected at the hip with the U.S. dollar."	
    The Canadian dollar finished at C$1.0042 versus the
U.S. dollar, or 99.58 U.S. cents, nearly unchanged from
Tuesday's North American close at C$1.0041 versus the U.S.
dollar, or 99.59 U.S. cents. It briefly touched its lowest level
since January at C$1.0053.	
    Moore said a close above that level could signal a further
weakening of the Canadian dollar and possibly push it out of the
tight range it's hovered in near parity with the greenback since
January.	
    The Canadian and U.S. currencies have weakened since
disappointing growth in U.S. jobs creation in March reported
last week, raising doubts about the strength of the American
economic recovery.	
    "If we continue to get positive data from the U.S. then
Canada will outperform and if we don't it will underperform,"
said Adam Cole, global head of foreign exchange strategy at
Royal Bank of Canada in London.	
    Domestically the picture has been brighter, with the
Canadian economy adding a stunning 82,000 jobs in March, eight
times the 10,000 forecast. Data on Wednesday showed housing
starts rose to 215,600 units on a seasonally adjusted annualized
basis in March. 	
    The numbers have economists predicting the Bank of Canada
may raise its key lending rate, above its current 1 percent
level, well ahead of the U.S. Federal Reserve, which has said it
intends to keep rates near zero until late 2014.	
    The median forecast in a Reuters poll of 40 economists and
strategists released on Wednesday predicted the Bank of Canada's
next interest rate hike will not come until the second quarter
of 2013. 	
    None of the respondents saw a change in rates at the next
Bank of Canada policy announcement date, April 17. 	
    Wednesday's improved risk sentiment pushed down Canadian
government bond prices. Canada's two-year bond fell 6
Canadian cents to yield 1.221 percent, while the 10-year bond
 dropped 26 Canadian cents to yield 2.014 percent.