CANADA FX DEBT-C$ surges 4-month high on strong U.S. data, ECB

Thu Sep 6, 2012 1:04pm EDT
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* C$ hits C$0.9809 vs US$, or $1.0195, firmest since April
    * ECB sets out bond buying program
    * U.S. service sector growth rises in August
    * U.S. private sector adds more jobs than expected in August

    By Solarina Ho
    TORONTO, Sept 6 (Reuters) - The Canadian dollar rallied
against its U.S. counterpart on Thursday to its highest level
since late April, boosted by stronger-than-expected U.S.
economic data and the European Central Bank's plan to help
tackle the region's debt crisis.
    Global stock markets and commodity prices also rallied on
news of the ECB's aggressive bond-buying program and the data,
which included a report showing the pace of growth in the
massive U.S. service sector accelerated in August on the back of
a rebound in employment and exports.  
    "Obviously we're having a very good run in risk ...
certainly the services ISM numbers that we got out of the U.S. I
think has encouraged a more buoyant risk environment," said
Jeremy Stretch, head of foreign exchange strategy with CIBC
World Markets in London.
    At 12:59 p.m. (1659 GMT), Canada's dollar was
trading at C$0.9824 against the greenback, or $1.0179, up from
Wednesday's North American finish of C$0.9909 versus the U.S.
dollar, or $1.0092.
    The string of positive U.S. data helped power the currency
to C$0.9809 against the greenback, or $1.0195 - its strongest
level since April 30. The currency had firmed to a high of
C$0.9843 three times in recent weeks before breaking though.
    "Obviously, the C$0.98 threshold is starting to attract some
fairly significant interest," said Stretch, adding that a
rallying equities market and stronger oil prices also provided
persuasive support for the move.
    Other positive U.S. data included news that the private
sector added 201,000 jobs in August - more than economists had
expected - while the number of Americans filing new claims for
jobless benefits fell last week to the lowest level in a month.
    The data is the latest to hint that the economy of Canada's
largest export market is gaining steam even as unemployment
remains high. Both Canada and the United States will be
releasing August employment data on Friday. 
    But for the moment, riskier assets were also rallying on the
news that the ECB agreed to launch a new and potentially
unlimited bond-buying program to lower struggling euro zone
countries' borrowing costs and draw a line under the debt
    Seeking to back up his July pledge to do whatever it takes
to preserve the euro, ECB President Mario Draghi said the new
plan, aimed at the secondary market, would address bond market
distortions and "unfounded" fears of investors about the
survival of the euro.
    Still, Greg Moore, FX strategist at TD Securities, noted
that currency markets will have to contend with a German court
ruling next week on the constitutionality of Germany
participating in bond buying in Europe.
    Canadian government bonds were lower across the curve, with
the two-year bond easing 9 Canadian cents to yield
1.158 percent. The benchmark 10-year bond price was
down 74 Canadian cents, to yield 1.835.