CANADA FX DEBT-C$ higher on risk rally, eyes BoC

Tue Dec 7, 2010 8:24am EST
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 * C$ higher at 99.83 U.S. cents
 * Bonds lower across curve, track U.S. debt prices
 By Jennifer Kwan
 TORONTO, Dec 7 (Reuters) - Canada's dollar rose on Tuesday,
boosted by a U.S. tax deal and optimism that Ireland will pass
an austerity budget and ahead of a Bank of Canada interest rate
 Global equities, a key barometer of investors' willingness
to buy risk, rose after U.S. President Barack Obama forged a
compromise with Republicans to extend Bush-era tax breaks for
two years. The deal was expected to extend breaks on dividends
and capital gains. For details, see [ID:nN06211347]
 As well, investors were optimistic Irish lawmakers will
unveil a record austerity budget on Tuesday. [ID:nLDE6B60DA]
 "The FX market appears to be responding with a good degree
of optimism," said Sacha Tihanyi, currency strategist at Scotia
 The Canadian dollar CAD=D4 climbed to a high of C$1.0011
to the U.S. dollar, or 99.89 U.S. cents. At 7:55 a.m. (1255
GMT), it stood at C$1.0017 to the U.S. dollar, or 99.83 U.S.
cents, up from C$1.0053 to the U.S. dollar, or 99.47 U.S.
cents, at Monday's close.
 Oil, a key Canadian export, rallied above $90 a barrel,
while gold and copper futures soared to record peaks.
 But Tihanyi said Canada's dollar was "underperforming a
little bit" as investors were cautious ahead of the the Bank of
Canada's interest rate announcement due at 9 a.m.
 With markets pricing in next-to-no-chance of a move,
investors will eye the accompanying statement closely.
 "Even though we're up, we're still not in the upper echelon
of the performance charts probably because everybody wants to
see the tone of the Bank of Canada statement," said Tihanyi.
 Canadian bond prices were weaker across the curve, tracking
U.S. Treasuries, which fell as the market braced for fresh
supply. [US/]
 The two-year Canada bond CA2YT=RR was down 4 Canadian
cents to yield 1.582 percent, while the 10-year bond
CA10YT=RR fell 40 Canadian cents to yield 3.174 percent.
  (Reporting by Jennifer Kwan; editing by Jeffrey Benkoe)