CANADA FX DEBT-Optimism, oil price lift C$; bonds rise

Mon Dec 8, 2008 5:15pm EST
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* Canadian dollar supported by oil, risk aversion fades

* Bonds mixed, reflecting stocks rally, rate-cut hopes

* Focus on Tuesday's Bank of Canada rate decision

By Ka Yan Ng

TORONTO, Dec 8 (Reuters) - The Canadian dollar finished more than 1 U.S. cent higher on Monday, supported by a rebound in the price of oil and as risk aversion cooled.

Canadian bond prices were mixed as stock markets rallied and as market players toyed with the possibility that the Bank of Canada will deliver a bigger rate cut than forecast.

The currency finished the North American session at C$1.2540 to the U.S. dollar, or 79.74 69 U.S. cents, up from C$1.2709 to the U.S. dollar, or 78.68 U.S. cents, at Friday's close.

Risk aversion, which has seen the U.S. dollar rise recently on safe haven interest, dimmed as talk of an imminent bailout deal for the Big Three U.S. automakers, and other government stimulus measures, boosted global equity markets.

"The market is certainly buoyed by what I'm going to call hope right now. You haven't got anything concrete yet but the market sees some reason for optimism," said Shane Enright, currency strategist at CIBC World Markets.   Continued...