CANADA FX DEBT-C$ rises on ECB talk, U.S. stimulus hope

Fri Jul 27, 2012 2:01pm EDT
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* C$ rises to C$1.0035 vs US$, or 99.65 U.S. cents
    * Follows oil, global markets higher
    * Bond prices retreat across the curve

    By Jennifer Kwan
    TORONTO, July 27 (Reuters) - Canada's dollar soared to its
highest level in 10 weeks on Friday on growing expectations the
European Central Bank will take action to tackle the region's
sovereign debt crisis and hopes of further stimulus by the U.S.
Federal Reserve.
    Market sentiment got an additional boost after the leaders
of France and Germany said they are "determined to do everything
to protect the euro zone" and its single currency. That echoed
comments on Thursday by ECB President Mario Draghi's pledge to
do whatever is necessary to protect the euro zone from collapse.
    "Lots of lip service from the ECB and Europe in general. The
markets obviously liking the comments out of there and hoping
for some action," said John Curran, senior vice president at
    At around 1:45 p.m. (1745 GMT), the Canadian dollar 
stood at C$1.0041 versus the greenback, or 99.59 U.S. cents,
after hitting a high of C$1.0035. On Thursday, it finished the
North American session at C$1.0096 against the U.S. dollar, or
99.05 U.S. cents.
    Curran said the market was also optimistic the U.S. Federal
Reserve will move to stimulate the economy after data that
showed U.S. economic growth slowed in the second quarter. 
    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. 
    "People are looking for, hoping, praying for stimulus from
the Fed. That's why the market is adding risk," said Curran.
    Blake Jespersen, managing director of foreign exchange sales
at BMO Capital Markets, said market moves will be largely
contained until there is more clarity around Europe.
    "It's still fairly rangebound, lighter volumes, and I think
the market in general is just waiting for more clarity from the
ECB in terms of what they have in mind to sustain the euro at
whatever cost," added Jespersen.
    Canadian bond prices moved lower across the curve with the
two-year bond off 17 Canadian cents to yield 1.102
percent and the benchmark 10-year bond down C$1.23
Canadian cents lower to yield 1.776 percent.