CANADA FX DEBT-C$ firms after Spanish deal lifts sentiment

Tue Jul 10, 2012 7:54am EDT
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* C$ firmer at C$1.0177 vs US$, or 98.26 U.S. cents
    * Bond prices slip across the curve

    By Claire Sibonney
    TORONTO, July 10 (Reuters) - The Canadian dollar edged up
against its U.S. counterpart on Tuesday after euro zone
ministers agreed on the outline of an aid package for Spain,
which helped offset investor concern over signs of a sharp
economic slowdown in China and its potential impact on the
global economy.
    Euro area finance chiefs reached a deal to grant Madrid an
extra year until 2014 to reach its deficit reduction targets in
exchange for further budget savings. They also ratified the
bailout for Spanish banks. 
    The decisions were aimed at preventing the currency area's
fourth largest economy, mired in a worsening recession, from
needing a full state bailout which would stretch the limits of
Europe's rescue fund and plunge it deeper into a debt crisis.
    "The Canadian dollar is doing a little bit better here this
morning, just on the back of a general uptick in risk appetite
across the markets," said Matt Perrier, director of foreign
exchange sales at BMO Capital Markets.
    "European peripheral spreads have pulled back and equities
are rallying a little bit ... it feels like the risk aversion in
the last few days was getting a little bit tired."
    At 7:42 a.m. (1142 GMT), the Canadian currency was
at C$1.0177 against the greenback, or 98.26 U.S. cents, slightly
stronger than Monday's North American session close at C$1.0193
to the U.S. dollar, or 98.11 U.S. cents.
    Perrier said there was good selling interest for the U.S.
dollar against Canada's above C$1.02 and bids back down towards
    Still, investors remained skeptical about riskier assets on
doubts the European crisis can stabilize. Data from China also
added pressure after a report showed imports in June rose at
only half the pace expected, signal ling a need for Beijing to
do more to bolster growth. 
    Canadian bond prices drifted lower across the curve. The
two-year government bond was down 3 Canadian cents to
yield 0.973 percent, while the benchmark 10-year bond
 was off 6 Canadian cents to yield 1.668 percent.