CANADA FX DEBT-C$ rises on hopes of central bank stimulus
* C$ ends at C$1.0152 vs US$, or 98.50 U.S. cents * Euro, stocks higher on stimulus, ECB hopes * Bond prices lower across the curve By Jennifer Kwan TORONTO, July 25 (Reuters) - Canada's dollar recovered from a near two-week low on Wednesday, tracking the euro and global shares higher on investor optimism that policymakers around the world will do more to jolt economies back on to the path of growth. Markets have for weeks expected central banks will take action given the European debt crisis and weak economic data globally. Top U.S. Federal Reserve officials recently spelled out what measures they might take to boost growth and hiring. Fed action could come as soon as next week, as its policy-setting committee meets Tuesday and Wednesday. "All in all, it's really the broader move that has CAD appreciating. It's really just a reminder that the FOMC meeting is coming up and there is the potential for the Fed to sound more dovish or even take policy action," said Camilla Sutton, chief currency strategist at Scotiabank. Also on Wednesday, ECB Governing Council member Ewald Nowotny said there were arguments for giving Europe's permanent rescue fund a banking license, allowing it to borrow unlimited ECB money, an idea that the central bank has rejected so far. Investors have become increasingly worried that the force of the new fund would be hugely diminished if, as widely expected, Spain needs a full scale sovereign bailout on top of the rescue deal for its banks. "That gave markets a bit of a boost pretty much across the board and that enabled them to overlook the ... poor data overnight," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. The Canadian dollar ended at C$1.0152 against the greenback, or 98.50 U.S. cents, up from Tuesday's North American session close at C$1.0204 versus its U.S. counterpart, or 98.00 U.S. cents. Overnight, it hit C$1.0232, or 97.73 U.S. cents, its weakest level since July 12. Weighing on sentiment earlier in the global session, data showed Britain's economy shrank deeper into recession than expected in the second quarter of 2012, battered by everything from budget austerity to the neighboring euro zone crisis. German business sentiment also dropped in July to its lowest level in more than two years, adding to signs that Europe's largest economy is losing momentum along with its immunity to fallout from the region's deepening problems. In the absence of any major surprises, Sutton anticipates the Canadian currency will trade in a tight range of C$1.01-C$1.0190 against the greenback overnight. Canadian bond prices retreated across the curve with the two-year bond down 7 Canadian cents to yield 0.965 percent and the benchmark 10-year bond off 8 Canadian cents to yield 1.585 percent. Elsewhere, an auction of 10-year Canadian government bonds on Wednesday produced an average yield of 1.705 percent, the lowest average yield in at least 5 years.
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