CANADA FX DEBT-C$ rallies to one-week high on Europe deal

Fri Jun 29, 2012 2:42pm EDT
 
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* C$ rises to high of 98.37 U.S. cents
    * Biggest daily percent move since Aug 2011
    * Currency rallies along with euro, global stocks
    * Extends gains after stronger April GDP data
    * Bonds prices descend across curve

    By Jennifer Kwan
    TORONTO, June 29 (Reuters) - Canada's dollar rose to a
one-week high on Friday on a deal among European leaders on
measures to contain the region's debt crisis and on
stronger-than-expected domestic growth data.
    Investors were willing to take on more risk after euro zone
leaders agreed on Friday to let their rescue fund inject aid
directly into stricken banks from next year and intervene on
bond markets to support troubled member states.
  
    The agreement helped push the Canadian currency up more than
1.5 percent while U.S. and global stocks notched gains of 2
percent. Oil prices soared more than 6 percent on optimism the
measures would stem Europe's debt crisis and help revive global
growth.   
    "The market was looking for nothing. They get something like
this agreement," said John Curran, senior vice president at
CanadianForex. "Expectations were very low. So getting something
out of it has excited people."
    David Bradley, director of foreign exchange trading at
Scotiabank, characterized the global market move as a "risk
rally"
    "Everyone's buying risk after what happened, (and) the
comments from Europe. I think this move has caught a lot of
people off guard," he said.
    Also aiding the Canadian currency was stronger than
forecasted domestic growth data. 
    A rebound in oil output helped deliver surprisingly strong
Canadian economic growth of 0.3 percent in April after two
months of limp readings, according to Statistics Canada data
released on Friday. The market had forecasted growth of 0.2
percent. 
    At around 2:10 p.m. (1810 GMT), the Canadian currency
 was at C$1.0180 to the greenback, or 98.23 U.S. cents,
after embracing a high of C$1.0166, or 98.37 U.S. cents, its
strongest since June 20. It was the currency's strongest percent
gain move since August 2011.
    The Canadian dollar finished Thursday's session at C$1.0328
to the greenback, or 96.82 U.S. cents.
    The currency clawed back from the three-week low it hit on
Thursday on the European summit progress, even though there was
no movement towards common euro zone bonds, which leaders
including Italy's Mario Monti and France's Francois Hollande
have called for.
    Yields on 10-year Spanish and Italian debt retreated and the
common currency rose more than 1.5 percent.  
    Canada mostly underperformed against most major currencies
including the euro and commodity-linked New Zealand and
Australian dollars.
    Elsewhere, Canadian bond prices were lower across the curve
with the two-year Canadian government bond sank 16
Canadian cents to yield 1.031 percent, while the benchmark
10-year bond dropped 56 Canadian cents to yield
1.737 percent.