CANADA FX DEBT-C$ helped higher by risk rebound

Wed Jul 11, 2012 12:42pm EDT
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* C$ firms to C$1.0190 vs US$, or 98.14 U.S. cents
    * Currency largely outperforms against majors
    * Bond prices lower across the curve
    * Markets eye U.S. Fed minutes

    By Claire Sibonney
    TORONTO, July 11 (Reuters) - The Canadian dollar was
slightly stronger against the U.S. dollar on Wednesday, helped
by firmness in commodity prices and after recent weakness on
concerns over Europe's debt crisis and its impact on growth.
    Crude oil futures got a boost on Wednesday on expectations
that there may be more signals of economic stimulus from the
U.S. Federal Reserve when minutes of its meeting last month are
released later in the day. Gold and base metals were also
    "We're seeing a small boost to the Canadian currency coming
from higher commodity prices," said Charles St-Arnaud, economist
and currency strategist at Nomura Securities in New York.
    "That's helping to support the Canadian dollar. But there's
still concern out there about what's happening in Europe and
also what could be announced by the Fed this afternoon."
    Investors were awaiting the release of minutes from the U.S.
Federal Reserve's June meeting, which they will scrutinize for
any hints of another round of asset buying in the coming months.
    The Fed last week decided to extend a bond
maturity-extension programme called Operation Twist. But doubts
remain as to Twist's effectiveness.
    At around 12:20 p.m. (1620 GMT), the Canadian currency
 stood at C$1.0190 versus the U.S. dollar, or 98.14 U.S.
cents, slightly firmer than Tuesday's North American session
close at C$1.0226 against the greenback, or 97.79 U.S. cents.
    Canada's dollar has ebbed and flowed in recent sessions on
global economic data and developments related to the euro zone's
financial stability.
    Most recently, a German debt sale underlined the growing
lack of faith by some investors in measures agreed by European
policymakers last month to combat the crisis, including help for
Spain's banks and allowing the region's new rescue fund to buy
government debt.
    These concerns were heightened by lack of clarity from euro
zone finance ministers on implementing the measures and
questions about when Germany's Constitutional Court would give
its verdict on the new regional bailout fund, known as the
European Stability Mechanism.
    Still, the currency largely outperformed against major
currencies such as the yen and euro. Against the euro,
the Canadian dollar rose to C$1.2468, or 80.21 euro cents, its
strongest since June 2010. 
    But the Canadian currency slid against its Australian
    "At least at the moment, we're having a better perception of
risk today I think (that) is providing some short-term impetus,"
said Jeremy Stretch, head of currency strategy at CIBC in
    "The question as to how far this can actually take us and
whether this risk rebound is really durable, I'm not so
convinced as yet."
    Canadian bond prices were lower across the curve. The
two-year government bond was down 5 Canadian cents to
yield 0.993 percent, while the benchmark 10-year bond
 sank 20 Canadian cents to yield 1.675 percent.