CANADA FX DEBT-C$ turns higher with risk appetite; bonds drop

Wed Mar 4, 2009 5:05pm EST
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* C$ rises nearly one U.S. cent

* Analysts still see downward pressure, eyes C$1.30 level

* Bonds weaken broadly with equity rally

By Ka Yan Ng

TORONTO, March 4 (Reuters) - The Canadian dollar climbed against the U.S. currency on Wednesday as risk appetite returned and oil prices rose, spurred by a solid rally in global equity markets.

The currency weakened overnight to as low as C$1.2968 to the U.S. dollar, or 77.11 U.S. cents, but gradually recovered on the prospect of more stimulus spending by China and firmer oil prices.

A senior Chinese economic planning official said China would increase spending in areas such as manufacturing and infrastructure, on top of the 4 trillion yuan ($585 billion) stimulus package unveiled in November. [ID:nBJC000263]

The gains accelerated into the North American session, hitting C$1.2712 to the U.S. dollar, or 78.67 U.S. cents, as stock markets rallied and key indexes ended more than 2 percent higher, including the Toronto Stock Exchange.

The Canadian dollar has been heavily influenced by movements on stock markets recently, a barometer of risk sentiment.   Continued...