CANADA FX DEBT-C$ firms as China export hopes boost commodities

Wed Jun 9, 2010 4:55pm EDT
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 * C$ rises to 95.76 U.S. cents
 * Reports say China exports up 50 percent
 * Bond prices weaken as safely bid unwinds
 * Five-year bond auction sees soft demand
 By Claire Sibonney and Jeffrey Hodgson
 TORONTO, June 9 (Reuters) - Canada's dollar strengthened
against the U.S. currency on Wednesday, fueled by news of
stronger than expected Chinese exports, which raised hopes for
global growth and boosted resource prices.
 "It's all been a slight return to risk appetite, that's
pretty much the biggest factor driving everything and comes
back to ... Chinese exports," said Jon Gencher, a director of
foreign exchange sales at BMO Capital Markets.
 "Oil is up, commodities are doing okay. So, all in all,
it's risk-on. But with that said the market is still going to
remain very cautious."
 As Canada is a major exporter of oil and other commodities,
improving prospects for global growth often boost the
 The Canadian dollar closed at C$1.0443 to the U.S. dollar,
or 95.76 U.S. cents, up from Tuesday's North American finish of
C$1.0485 to the U.S. dollar, or 95.37 U.S. cents.
 The currency firmed as high as C$1.0365 to the U.S.
dollar, or 96.48 U.S. cents, its strongest level since June 4,
but pared gains as North America stock markets dropped into
negative territory late in the session. [.TO][.N]
 Chinese exports in May grew about 50 percent from a year
earlier, a senior government official told an internal investor
conference on Wednesday, sources at the meeting told Reuters.
The data is due out on Thursday. [ID:nBJD003776]
 "The expectation was for 30 percent and that generally is
giving a bid to riskier assets and riskier currencies, and
cyclical currencies," said Adam Cole, head currency strategist
at RBC Capital Markets in London.
 Against the euro, the Canadian dollar firmed below C$1.25,
or 80 euro cents, to its highest levels since October 2000
against the European currency.
 Currency traders are now looking ahead to a speech and
press conference by Bank of Canada Governor Mark Carney in
Montreal in which he may offer clues on whether the central
bank will raise rates further next month.
 Canadian bond prices edged lower across the curve, as the
early rise in risk appetite cooled bids from investors seeking
traditional safe-haven assets.
 As a result, Canada's auction of five-year bonds met with
more tepid demand than usual, producing the weakest
bid-to-cover ratio for a five-year auction since May 2009.
 The two-year government bond CA2YT=RR fell 10 Canadian
cents to yield 1.722 percent, while the 10-year bond
CA10YT=RR fell 24 Canadian cents to yield 3.351 percent.
 Canadian bonds underperformed U.S. issues across the yield
curve, with the 10-year Canadian yield rising to 17.1 basis
points above its U.S. counterpart from 13.4 basis points on
 "It's just reflecting that the global risk picture looks
much better and, in that environment, Canada will continue to
outperform as an economy and would probably mean we have to
deal with higher interest rates," said Tom Nakamura,
fixed-income portfolio manager at AGF Investments.