CANADA FX DEBT-C$ firms on Carney comment, easing of euro zone fears

Tue Apr 24, 2012 4:55pm EDT
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* C$ ends at C$0.9880 vs US$, or $1.0121
    * Euro zone fears ease with Dutch bond sale
    * U.S. housing data helps risk sentiment
    * Bank of Canada comments boost currency
    * Bond prices mostly lower

    By Jon Cook	
    TORONTO, April 24 (Reuters) - The Canadian dollar advanced
against its U.S. counterpart for a third straight session on
Tuesday as global growth concerns eased and after the head of
the Bank of Canada reinforced the bank's more positive outlook
for the domestic economy and the possibility of raising interest
    Global stocks rebounded from Monday's sharp sell-off after
the Netherlands sold bonds without problems, calming markets a
day after the Dutch government collapsed in a crisis over budget
    Data on the U.S. housing market also raised optimism about
the U.S. economic recovery and helped stoke risk appetite. U.S.
single-family home prices rose in February for the first time in
10 months, according to the closely watched S&P/Case-Shiller
    The Canadian dollar finished at C$0.9880 against
the U.S. dollar, or $1.0121, up from Monday's North American
close at C$0.9910 against the greenback, or $1.0091.	
    "All of those things have small impacts on the U.S.-Canada
pair, but we'll be stuck in this range until we do see a much
stronger signal of a divergence between Canada and the U.S.,"
said Greg Moore, foreign exchange strategist at TD Securities.	
    Since the end of January, the Canadian dollar has hovered
within a 2-cent range on either side of parity with the
greenback, between C$0.9842 and C$1.0053.	
    Moore said the currency was still being supported by the
Bank of Canada's more hawkish tone in last week's rate
announcement and Monetary Policy Report, when the central bank
signaled it may be close to raising its key lending rate, which
has been frozen at 1 percent for the last 19 months.
    "It's been a grind higher for the Canadian dollar over the
past two days and a lot of that is lingering sentiment of the
hawkishness from last week, especially compared to some of the
tone of central banks from around the world," Moore added.	
    On Tuesday, Bank of Canada Governor Mark Carney repeated to
the House of Commons finance committee that the central bank
might have to increase interest rates because of the stronger
performance of the economy and firmer underlying inflation.
    Carney's remarks and the U.S. data offset soft Canadian
retail sales figures on Tuesday, as disappointing car sales led
to an unexpected 0.2 percent fall in retail trade in February.
Making for an even soggier reading, the volume of sales, used in
calculating real gross domestic product, slumped by 0.6 percent
from January. 	
    Some analysts said the data supported not raising rates
until economic conditions improve.	
    "There's cause to believe that it was a bit premature to be
talking rate hikes in the current fragile environment, and a
weak retail sales print supports that thesis," said Derek Holt,
vice president of economics at Scotiabank.	
    Canadian government bond prices were mostly lower with the
two-year bond down 10 Canadian cents to yield 1.415
percent. The benchmark 10-year bond fell 24 Canadian
cents to yield 2.068 percent.