CANADA FX DEBT-C$ rallies as Europe deal boosts risk bid

Fri Jun 29, 2012 4:32pm EDT
 
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* Ends at C$1.0181 vs US$, or 98.22 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 as a deal among European leaders on
measures to contain the region's debt crisis boosted investor
confidence.
    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 or more.
    Oil prices soared more than 9 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.
    Stronger than forecasted domestic data also aided the
Canadian currency.
    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. 
    The Canadian currency ended at C$1.0181 to the
greenback, or 98.22 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 at C$1.0328 to the
greenback, or 96.82 U.S. cents.
    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.
    The currency ended the week up 0.6 percent, and was higher
by 1.4 percent for the month. It capped the quarter with a 2
percent loss.
    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.