CANADA FX DEBT-C$ gains, bonds fall as riskier assets sought

Wed Dec 1, 2010 8:31am EST
 
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   * C$ rises to 98.15 U.S. cents
 * Bonds fall across curve as risk appetite mounts
 TORONTO, Dec 1 (Reuters) - The Canadian dollar was firmer
against the U.S. currency on Wednesday, supported by
speculation the European Central Bank may help ease the euro
zone debt crisis.
 Signs of robust economic growth in China and recovery in
parts of Europe lifted world stocks while a relatively
successful Portuguese debt sale helped ease short-term fears
about the euro zone's debt crisis. [MKTS/GLOB]
 There was also growing talk that the European Central Bank
could step up purchases of sovereign debt issued by the more
highly indebted peripheral euro zone countries.
[ID:nLDE6B00SW]
 That helped lift the Canadian dollar from a session low of
C$1.0272 to the U.S. dollar, or 97.35 U.S. cents. North
American equity futures indicated a positive start to
Wednesday's session.
 The price of oil was also higher. It is often an indicator
of the Canadian dollar's direction since Canada is a net
exporter of the commodity.
 "There was a lot of excitement about the potential for the
ECB to mount a more aggressive bond buying program at their
interest rate decision tomorrow, so I think markets are
temporarily feeling a little bit more secure," said Camilla
Sutton, chief currency strategist at Scotia Capital.
 "With CAD, having retraced a lot of yesterday's losses,
it's really a midperformer."
 The currency began the new trading month with a strong
advance after recording a 0.6 percent drop in November, its
first monthly drop in three months.
 At 8:15 a.m. (1315 GMT), the Canadian dollar CAD=D4 was
at C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, up from
Tuesday's close at C$1.0266 to the greenback, or 97.41 U.S.
cents.
 Sutton said the 50-day moving average of C$1.0171, and the
100-day moving average of C$1.0280, were key levels being
watched.
 "It's trading right now right in the middle of its 50- and
100-day moving average. If we drop below the 50-day, that would
be bullish Canada."
 Canadian government bonds tracked U.S. Treasuries lower as
appetite for riskier assets, such as stocks, drew investors
away from the relative safety of government debt.
 The two-year government of Canada bond CA2YT=RR was off 6
Canadian cents to yield 1.650 percent, while the 10-year bond
CA10YT=RR slipped 46 Canadian cents to yield 3.122 percent.
 Canada's data calendar is bare until Friday when the
November jobs report is published. It will be the last major
piece of data to consider before the Bank of Canada's next
interest rate decision on Dec. 7, although the market is
already pricing near-certainty that the central bank will leave
unchanged the target for the overnight interest rate at 1
percent. BOCWATCH
 (Reporting by Ka Yan Ng; Editing by Kenneth Barry)