CANADA FX DEBT-C$ rises as the greenback weakens

Tue Jun 7, 2011 5:02pm EDT
 
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   * C$ rises to C$0.9755 vs US$ or $1.0251
 * Greenback weakens after China comments on U.S. assets
 * Bonds fall as firm European data saps safe-haven bid
 By John McCrank
 TORONTO, June 7 (Reuters) - Canada's dollar rose against a
broadly weaker U.S. dollar on Tuesday after bearish comments
from China on U.S. assets and improved market sentiment in
Europe helped put a floor under commodity prices.
 The greenback fell to a one-month low against a basket of
currencies on Tuesday after a Chinese official warned against
"excessive" U.S. dollar holdings because Washington could take
steps to further weaken the currency. [ID:nLDE7560QW]
 "We've seen a rally in the euro since the China comments
came out last night," said David Bradley, director of foreign
exchange trading at Scotia Capital. "That's caused the Canadian
dollar to strengthen as well on general U.S. dollar weakness."
 The Canadian dollar [CAD=D4] ended the North American
session at C$0.9755 to the U.S. dollar, or $1.0251, up from a
close of C$0.9808, or $1.0196, on Monday. The currency spent
the day in a range between C$0.9809 and C$0.9732. The 100-day
moving average is C$0.9747.
 U.S. Federal Reserve Chairman Ben Bernanke acknowledged on
Tuesday a slowdown in the U.S. economy but offered no hints
that the central bank is considering any further monetary
stimulus to support growth. [ID:nW1E7GV010]
 Improved investor confidence also helped boost the Canadian
dollar, said David Tulk, chief Canada macro strategist at TD
Securities. "There was some pretty encouraging data out of
Europe."
 Figures showed that euro zone retail sales were nearly
three times stronger than expected in April. Also, German
manufacturing data was up 2.8 percent, helped by an above
average number of orders, indicating the economy should expand
at a healthy pace. [ID:nLDE7560WH] [ID:nLDE7560XG]
 "That's generally putting markets in a bit more of a
positive mood and showing up as a weaker dollar that has helped
the Canadian dollar, along with other currencies," Tulk said.
 The weaker greenback gave a boost to commodities traded in
U.S. dollars. The price of gold, which is up 5 percent over the
past three weeks, firmed to $1,550 an ounce before falling back
to around $1,544, while U.S. oil prices settled up 8 cents,
above $99 a barrel.
 Canada is a major exporter of commodities, and swings in
commodity prices often influence its currency. [ID:nLDE68E0P8]
 Bond prices started heading lower early in the day when the
European data came out, lessening the appeal of safe-haven
government debt, said Sal Guatieri, senior economist at BMO
Capital Markets.
 Canada's two-year bond [CA2YT=RR] was down 3 Canadian cents
to yield 1.447 percent, while the 10-year bond [CA10YT=RR] was
down 25 Canadian cents to yield 3.034 percent.
 (Additional reporting by Solarina Ho; editing by Peter
Galloway)