CANADA FX DEBT-C$ surges to 3-week highs in risk rally

Thu Dec 2, 2010 4:26pm EST
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 * C$ closes at 99.61 U.S. cents
 * Bonds track Treasuries lower
 (Updates to close, adds details, commentary)
 By Claire Sibonney
 TORONTO, Dec 2 (Reuters) - The Canadian dollar climbed more
than a penny against its U.S. counterpart on Thursday, peaking
near a three-week high and outperforming the rest of the major
currencies on the back of a broad risk rally.
 The Canadian dollar CAD=D4 hit a session high of C$1.0028
against the greenback, or 99.72 U.S. cents, its highest level
since Nov. 12.
 With no Canadian economic data to move on, direction was
largely driven by global markets as stocks and commodity prices
rallied, due in part to upbeat U.S. housing and retail data.
 "The Canadian dollar is just on a tear," said David Tulk,
senior macro strategist at TD Securities.
 The strength of the currency was supported by crude oil
futures that ended at their highest level in 25 months and by
gold's push to nearly $1,400 an ounce. [O/R] [GOL/]
 "But, generally, we're looking at a fairly positive risk-on
day and the Canadian currency is viewed as a risk play as part
of the commodity basket," Tulk said
 The euro rebounded against the U.S. dollar on further
evidence of economic recovery in Europe and the United States.
Traders also cited European Central Bank buying of Portuguese
and Irish bonds. [FRX/]
 "It's very much a flow driven story," said Sacha Tihayni, a
currency strategist at Scotia Capital.
 "Everything is going in the same direction today against
the U.S. dollar so that provides the pretext for Canadian
dollar strength."
 The Canadian dollar CAD=D4 closed the North American
session at C$1.0039 to the U.S. dollar, or 99.61 U.S. cents, up
sharply from C$1.0170 to the U.S. dollar, or 98.33 U.S. cents,
at Wednesday's close.
 The currency is expected to be fairly rangebound and remain
close to current levels near parity with the U.S. dollar over
the next 12 months, according to a Reuters poll released on
Thursday. [ID:nN02224928]
 Tihanyi said parity represented a significant support level
for the U.S. dollar on Thursday.
 The Canadian dollar's upside may be challenged ahead of
Friday's release of the Canadian November jobs report, which is
expected to show a modest gain. [ID:nN26125524]
 It will be the last major piece of data to consider before
the Bank of Canada's next interest rate decision on Dec. 7. The
U.S. jobs report is also due.
   In another poll released on Thursday, primary dealers and
global forecasters surveyed by Reuters said unanimously they
expected the Bank of Canada to keep interest rates on hold next
week, but the uneven economic recovery left them divided on the
timing of rate hikes in 2011. [ID:nN02264459]
 Canadian government bond prices fell amid the risk-on theme
of the day, tracking U.S. Treasuries lower after perceived
hawkish comments from St. Louis Federal Reserve Bank President
Charles Bullard. [US/]
 The two-year government of Canada bond CA2YT=RR was off 3
Canadian cents to yield 1.690 percent, while the 10-year bond
CA10YT=RR was down 25 Canadian cents to yield 3.208 percent.