CANADA FX DEBT-C$ climbs to near 3-month high on ECB hopes

Tue Aug 7, 2012 9:08am EDT
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* C$ hits C$0.9966 VS US$, or US$1.0034
    * Strongest level since May 11
    * Bond prices slip across the curve

    By Jon Cook
    TORONTO, Aug 7 (Reuters) - Canada's dollar firmed to its
strongest level in nearly three months against its U.S.
counterpart on Tuesday, boosted by investor hopes that the
European Central Bank will support bond markets in the
struggling euro zone.
    Markets have enjoyed a strong run on expectations the ECB
will step in and buy bonds to ease pressure on Spain and Italy,
albeit under strict conditions that are yet to be spelled out.
    With markets closed in Canada on Monday, the Canadian dollar
picked up where it left off on Friday, rising after strong U.S.
employment numbers fueled a broad commodities rally.
    "The tone of markets has been risk positive since that
data," said Adam Cole, global head of foreign exchange strategy
at Royal Bank of Canada in London.
    On Tuesday, the Canadian currency touched a session
high at C$0.9966 against the greenback, or $1.0034, its
strongest level since May 11.
    The Australian dollar also rose to its highest in more than
four months on Tuesday after the central bank kept interest
rates unchanged at 3.5 percent and dropped few hints it was in a
hurry to ease again. 
    At 8:47 a.m. EDT (1447 GMT), the Canadian dollar was at
C$0.9969, or US$1.0031, up from Friday's close at C$1.0019, or
99.81 U.S. cents.
    Traders were looking ahead to when U.S. Federal Reserve
Chairman Ben Bernanke hosts a town hall meeting with educators
from across the country on Tuesday for any signals of further
stimulus moves, such as quantitative easing, from the central
    "If the market continues to believe that the Fed is going to
go down the QE3 road in September, that will continue to support
risk and the Canadian dollar," said Cole.
    Cole said the Canadian currency would likely stay within a
range between a high of C$0.9950 against the greenback, or
US$1.0050, and its low from last week at C$1.0085, or 99.16 U.S.
    Canadian bond prices slipped across the curve with the
two-year bond off 5 Canadian cents to yield 1.150
percent, and the benchmark 10-year bond down by 47
Canadian cents to yield 1.821 percent.