CANADA FX DEBT-C$ rises as Greece deal boosts risk play
* C$ at C$1.0106 or 98.95 U.S. cents
* Bonds lower across the curve
By Claire Sibonney
TORONTO, May 3 (Reuters) - Canada's dollar rose against its U.S. counterpart on Monday as investors piled back into riskier assets, including currencies that feed off global growth, after a deal to rescue debt-stricken Greece brought some relief from worries about sovereign debt risks in the euro zone.
European countries over the weekend agreed to a 110 billion euro ($146.5 billion) aid package for Greece, the biggest financial bailout of a country in history.
But lingering doubts about Greece's ability to honor its pledge to introduce drastic wage cuts in return for the aid package knocked the euro lower against the safe-haven greenback.
"In currency markets, the overall move was renewed weakness in the euro but for the rest of the world, risk appetite was actually improved," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
"The Europeans are going to have to struggle to pay for the Greek bailout, but the Greek bailout in and of itself is good for risk appetite generally."
J.P. Blais, vice president foreign exchange products at BMO Capital Markets, also expressed measured optimism.
"There's still a lot of stuff that needs to happen before the Greece bailout is all said and done, but it's slowly but surely pointing to the fact that they're going to get it done," he said.
U.S. data that showed the manufacturing sector grew in April at its fastest pace in almost six years, and a rise in consumer and construction spending added to market confidence about moving away from the U.S. dollar. [ID:nN03193333]
Further supporting the commodity-linked currency, crude prices hit an intraday level above $87 a barrel, their highest level since October 2008, and gold prices rallied to a five-month high. [O/R] [GOL/]
"Commodities are still generally on an uptrend," Chandler said.
"There were efforts by China over the weekend as well to try to continue to curb growth there but I think markets are pretty sanguine about that," he added, referring to China's move to tighten its bank reserve requirement ratio by 50 basis points, its third increase of that magnitude this year.
"They're more taking from it the fact that growth remains quite strong in China."
The Canadian dollar CAD=D4 finished the North American session at C$1.0106 to the U.S. dollar, or 98.95 U.S. cents, up from Friday's finish of C$1.0158 to the U.S. dollar, or 98.44 U.S. cents.
Chandler said parity with the U.S. dollar is still very much in focus in the near term.
"We see it very tightly around that level for the most part, but still with the bias towards a stronger Canadian dollar at least through mid-year."
BONDS FLAT AS DATA, GREECE WEIGH
Canadian bond prices were little changed across the curve as U.S. Treasuries fell after investors began to unwind defensive positions taken last week at the height of the latest episode of the Greek debt crisis. [US/]
"A relatively strong equity market and the data today was mostly favorable ... so that's putting pressure on yields (in the United States)," Chandler said.
The two-year Canadian government bond CA2YT=RR was up 2 Canadian cents to C$99.305 to yield 1.888 percent, while the 10-year bond CA10YT=RR fell 5 Canadian cents to C$98.700 to yield 3.656 percent.
Canadian government bonds mostly outperformed U.S. issues, with the 10-year yield 4.1 basis points below its U.S. counterpart, compared with around 0.9 basis points the previous session. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)
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