CANADA FX DEBT-C$ rallies as risk appetite grows

Fri May 1, 2009 4:50pm EDT
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* C$ finishes at 84.32 U.S. cents

* Touches highest level in nearly 4 months

* Move exaggerated by thin trade

* Bond prices flat to lower (Adds details, quote)

By Jennifer Kwan

TORONTO, May 1 (Reuters) - The Canadian dollar shot higher versus the U.S. dollar on Friday as optimism that the economy may be on the road to stabilizing persuaded traders to buy currencies considered to be higher risk.

The Canadian dollar rallied as high as C$1.1831 to the U.S. dollar, or 84.52 U.S. cents, its highest level since Jan. 9.

The move added to gains recorded over the past two sessions, but Friday's move may have been exaggerated by thinner than normal trade with some European markets closed for the May Day holiday.

Momentum in recent sessions suggests the unwinding of "risk aversion" trades, helping to boost currencies such as the Canadian dollar as well as the Australian and New Zealand dollars, said Millan Mulraine, economics strategist at TD Securities.   Continued...