CANADA FX DEBT-C$ touches session peak on risk rally

Tue Jul 6, 2010 11:26am EDT
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   * C$ touches C$1.0486 to U.S. dollar, or 95.37 U.S. cents
 * Supported by rallying stocks, oil price
 * Bonds fall across curve
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, July 6 (Reuters) - The Canadian dollar touched a
session high against its U.S. counterpart on Tuesday after data
showed the U.S. services sector was still growing, adding to a
broad rally that boosted equity and commodity prices.
 The Canadian dollar CAD=D4 touched a session high of
C$1.0486 to the U.S. dollar, or 95.37 U.S. cents, shortly after
data showed the U.S. non-manufacturing sector grew in June for
a sixth straight month, even though the rate of growth slowed
more than expected. [ID:nN06274234]
 The data bolstered an already high-flying currency, which
had drawn support from an upbeat assessment of the global
economy by the Reserve Bank of Australia, as well as receding
sovereign debt fears in Europe. [FRX/]
 Canada's commodity-linked dollar was also boosted by oil
prices rebounding toward $74 a barrel, as well as a rally in
global and North American equity markets. [O/R] [MET/L] [.N]
 "You're seeing a bit of a rebound in equities this morning
and you're seeing an associated rebound in commodity prices,"
said Firas Askari, head of foreign exchange trading at BMO
Capital Markets.
 Askari said the Canadian dollar climbed after being
oversold in recent sessions.
 "When it couldn't break through the C$1.0680 area you saw
some people caught short the Canadian dollar. The fast money
turned themselves around and now they're running to catch up,"
he said.
 At 11:07 a.m. (1507 GMT), the Canadian dollar CAD=D4 was
at C$1.0506 to the U.S. dollar, or 95.18 U.S. cents, up sharply
from Monday's finish at C$1.0650 to the U.S. dollar, or 93.90
U.S. cents.
 Askari said that as the Canadian currency rebounds, a key
technical level to watch for will be C$1.0472 to the U.S.
dollar. If the unit is able to pierce that level then the
200-day moving average of C$1.0423 is the next target.
 On the data front, investors will be closely watching
Friday's jobs data for further clues on whether the Bank of
Canada will raise rates on July 20.
 "You've got a slightly higher percent chance of the bank
moving on July 20 being priced in," said Askari.
 Yields on overnight index swaps, which trade based on
expectations for the Bank of Canada's key policy rate, showed
the market sees a 60 percent chance of a July rate hike,
compared with around 55 percent on Monday. BOCWATCH
 Canadian government bonds fell across the curve as
investors flocked to riskier assets such as equities.
  The two-year government bond CA2YT=RR sank 8 Canadian
cents to yield 1.451 percent, while the 10-year bond
CA10YT=RR shed 35 Canadian cents to yield 3.121 percent.
 (Reporting by Jennifer Kwan; editing by Rob Wilson)