CANADA FX DEBT-ECB pledge sends C$ to 10-week high

Thu Jul 26, 2012 4:32pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* C$ at C$1.0096 vs US$, or 99.05 U.S. cents
    * Bond prices retreat across the curve
    * ECB head says "whatever it takes to preserve the euro"

    By Jennifer Kwan
    TORONTO, July 26 (Reuters) - Canada's dollar climbed to a
10-week high on Thursday, tracking the euro and other risk
assets higher after European Central Bank President Mario Draghi
pledged to do whatever was necessary to protect the euro zone
from collapse.
    "Within our mandate, the ECB is ready to do whatever it
takes to preserve the euro. And believe me, it will be enough,"
he told an investment conference in London. The comments sparked
a surge in the euro and global equities. 
    Draghi's comments were his boldest to date and helped
reassure a market waiting for the ECB to act on lowering high
government borrowing costs, some of which have spiraled to
unsustainable levels. 
    "It's really following moves in the euro. The Draghi
comments came out, which were very euro positive. It caused a
broad sell-off in the U.S. dollar. It caused commodities to
rally, it caused stocks to rally, which is Canadian dollar
positive," said David Bradley, director of foreign exchange
trading at Scotiabank.
    "Those were certainly some strong words that Draghi said.
Whether there's actually any follow through from what he said
will be interesting to find out."
    The Canadian dollar ended at C$1.0096 versus the
U.S. dollar, or 99.05 U.S. cents. The currency earlier surged to
C$1.0063, its strongest since May 16 and decidedly higher than
Wednesday's North American session finish at C$1.0152 against
the greenback, or 98.50 U.S. cents.
    "The broad theme -- it's not something that's confined to
the Canadian dollar obviously -- is that risk is clearly back on
this morning and this is all really to do with Europe," said
Chris Applin, senior dealer at Canadian Forex in London.
    Applin pegged the rest of the day's range between
C$1.0020-C$1.0100, but cautioned that markets are still very
    "I just think that this move is maybe premature given
obviously nothing fundamentally changed here; Draghi has just
come in and just done some jawboning basically," he said.
    "It's not like we're any further down the line on euro bonds
or even a kind of banking supervisory body ... but I think
markets will look for the slightest hint that the ECB are
willing to do a little bit more," Applin added.
    Still, Wall Street and Toronto stocks soared on the Draghi's
pledge, and oil prices climbed for a third straight day. 
    Canadian bond prices were lower across the curve in the
risk-on move with the two-year bond down 11 Canadian
cents to yield 1.014 percent and the benchmark 10-year bond
 42 Canadian cents lower to yield 1.637 percent.