CANADA FX DEBT-C$ rallies with commodities, hits record vs euro

Fri Jul 13, 2012 8:29am EDT
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* C$ at C$1.0168 vs US$, or 98.35 U.S. cents
    * C$ climbs to record high against euro
    * Bond prices mixed across the curve

    By Claire Sibonney
    TORONTO, July 13 (Reuters) - The Canadian dollar climbed to
a one-week high against the greenback on Friday and a record
peak against the euro after Chinese economic growth data came in
roughly in line with expectations, lifting market sentiment for
commodities and commodity-linked currencies.
     "Today what we have is a somewhat weaker U.S. dollar across
the board and the commodity bloc of currencies doing fairly
well, really because the Chinese data not as bad as the whisper
number but bad enough that it still insights the potential for
monetary and fiscal stimulus," said Camilla Sutton, chief
currency strategist at Scotiabank.
    China's economy grew at its slowest rate in three years in
the second quarter to its slackest pace in more than three years
but that highlighted the need for more growth-oriented policy
vigilance from Beijing, a prospect which boosted prices for key
Canadian exports like oil and copper.  
    "The rumor yesterday was that it was wildly going to
disappoint, and so not having disappointed to that extent,
combined with the potential for further stimulus is positive for
global growth currencies," added Sutton.
     At 8:14 a.m. (1214 GMT), the Canadian dollar was
at C$1.0168 versus the greenback, or 98.35 U.S. cents, up from
Thursday's close at C$1.0186 against the U.S. dollar, or 98.17
U.S. cents.
    Against the euro, the Canadian dollar advanced to
C$1.2379, or 80.78 euro cents, its strongest level against the
common currency since it was created in January 1999.
    The euro was broadly subdued after Moody's surprised markets
with a two-notch credit ratings cut for Italy, accompanied by a
warning that more downgrades could come.
    The downgrade serves as a potent reminder that despite
recent efforts by euro zone policymakers, the single currency
bloc and especially its periphery, remain mired in debt.
    For the Canadian dollar, Sutton said the Bank of Canada
meeting on Tuesday is the biggest near-term risk.
    "I think CAD is shockingly strong considering ... that at
the meeting we would expect the statement to sound less hawkish
than it did in June."
    A Reuters poll showed the Bank of Canada is expected to keep
interest rates on hold until the second quarter of 2013, as a
slowing global economy hurts the domestic outlook and as
Ottawa's new mortgage rules take pressure off the central bank
to cool the country's housing market. 
    Canadian bond prices were mixed across the maturity curve.
The two-year government bond was off 2 Canadian cents
to yield 0.974 percent, while the benchmark 10-year bond
 was up 5 Canadian cents to yield 1.625 percent.