CANADA FX DEBT-Canada dollar gains on oil, risk appetite
* C$ rises slightly to 94.51 U.S. cents
* Bonds mixed, mostly outperform U.S. Treasuries (Updates to close, adds quotes)
By Claire Sibonney
TORONTO, Feb 2 (Reuters) - Canada's currency rose against the U.S. dollar on Tuesday as influential commodity prices firmed and positive U.S. economic data fueled investor appetite for riskier assets.
"Some of the overseas currencies managed to make some gains against the greenback partly reflecting growing confidence about the sustainability of the recovery, carry-over from some of the stronger economic data that were seen yesterday," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
He was referring to Monday's data that showed U.S. manufacturing expanded in January at its fast pace since 2004. Ferley also noted that the Canadian dollar ticked higher on news of an expected rise of existing U.S. pending home sales in December. [ID:nN02242571]
"Strength of the U.S. economy seems to increase risk appetite for other currencies," he said.
Rising oil prices also had an impact on the commodity-linked currency. Oil rose more than 3 percent to nearly $77 a barrel, gaining for the second session on optimism about economic recovery and U.S. dollar weakness. [O/R]
The Canadian dollar was the slightly favored commodity-linked currency on Tuesday after Australia's central bank kept interest rates on hold in a surprise move, sending the Australian dollar down more than 1 percent against the U.S. dollar. [ID:nRBA]
The Canadian dollar finished the North American session at C$1.0581, or 94.51 U.S. cents. On Monday, it closed at C$1.0624, or 94.13 U.S. cents, appreciating for the first time in 10 sessions.
Earlier on Tuesday the currency rose as high as 94.65 U.S. cents before paring gains.
The data calendar for Canada is bare until Thursday when a report on building permits for December and an index of purchasing activity for January are due. ECONCA
Ferley said the next focus for investors will be U.S. ISM non-manufacturing index data on Wednesday and Canadian and U.S. jobs data out on Friday, which may offer further evidence of an economic recovery. [ID:nN01230910]
Canadian bonds were mixed, mostly outperforming their U.S. counterparts. The two-year bond CA2YT=RR was up 9 Canadian cents at C$100.43 to yield 1.288 percent, while the 10-year bond CA10YT=RR was flat at C$102.92 to yield 3.382 percent.
A rebound in North American stocks limited the demand for bonds.
"You've been seeing some modest moves in fixed-income markets but the moves have been fairly muted," said Ferley.
"Markets will likely await key releases at the end of this week with January employment reports for Canada and the U.S. to provide greater guidance in terms of how this recovery is playing out and what it implies for monetary policy." (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)
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