CANADA FX DEBT-C$ near 2 1/2-year high on upbeat sentiment

Tue Jan 4, 2011 8:26am EST
 
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 * C$ rises as high as C$0.9917 or $1.0084
 * Bonds prices soften across curve
 By Claire Sibonney
 TORONTO, Jan 4 (Reuters) - The Canadian dollar traded near
its strongest level since May 2008 on Tuesday, holding above
parity with its U.S. counterpart as investors kicked off the
new year with optimism about the world economy.
 U.S., Chinese and European PMI manufacturing data on Monday
boosted risk sentiment across financial markets along with the
so-called "January effect" that occurs as many fund managers
dispense with the need to settle end-of-year balances.
[MKTS/GLOB]
 "It's really dollar weakness. The dollar has drifted down
over the holiday period and it's continued to drift down as we
finally come to a day where all the major markets are open,"
said Adam Cole, global head of global FX strategy at RBC
Capital Markets in London.
 "It is a moderately risk positive day ... but I wouldn't
read too much into markets that are only just coming back to
life after a prolonged period of liquidity starvation with so
much on the agenda later in the week."
 North American employment data on Friday will provide the
main focus, with improvements expected on both sides of the
border. U.S. Federal Reserve Chairman Ben Bernanke's
congressional testimony that day will also be closely watched.
[ID:nN31145126] [ID:nN31145126]
 At 8:05 a.m. (1305 GMT), the currency stood at C$0.9927 to
the greenback, or $1.0074, up from Friday's finish where it
ended the year at C$0.9946 to the U.S. dollar, or $1.0054.
 Earlier on Tuesday the currency touched as high as C$0.9917
to the U.S. dollar, or $1.0084.
 Canadian trading desks were largely closed for the New Year
holiday on Monday when the currency firmed as high as C$0.9889,
or C$1.011. This represents a new technical support level for
the U.S. currency against the Canadian dollar, said Cole.
 The Canadian dollar's outperformance was notable against
other commodity currencies such as the Australian dollar, Cole
added.
 "That's largely as a result of the other commodity
currencies underperforming," he said.
 "The Aussie is being hit particularly by the impact of the
floods and what that might mean for commodity production and
overall growth in the early part of this year."
 Canadian bond prices were slightly weaker, tracking U.S.
Treasuries as investors sold safe-haven government debt in
favor of stocks and other riskier assets. [US/]
 The two-year bond CA2YT=RR was down 3 Canadian cents to
yield 1.682 percent, while the 10-year bond CA10YT=RR dropped
15 percent to yield 3.135 percent.
 (Reporting by Claire Sibonney; editing by Jeffrey Hodgson)