CANADA FX DEBT-C$ rallies as commodity prices recover
* C$ ends up at C$0.9577 vs US$, or $1.0442
* Bond prices fall across the curve (Updates to close, adds details, quotes)
By Claire Sibonney
TORONTO, May 10 (Reuters) - Canada's dollar closed higher against the safe-haven greenback on Tuesday as the commodity prices that normally underpin the currency rose on unexpectedly strong Chinese trade data.
With the Chinese figures reinforcing optimism about the global economy, U.S. crude prices advanced for a second day, supported also by concerns that flooding could hit the U.S. Gulf Coast refining hub. [O/R]
China posted a hefty trade surplus in April, nearly four times bigger than expected, as exports hit a record high and imports eased more than anticipated. The data illustrated the strength of China's economy even after its efforts to rein in inflation. [ID:nL3E7GA09F]
"I think the markets have concluded that overall global conditions still remain fairly accommodative and therefore as a result you're seeing commodity currencies a bit stronger," said Paresh Upadhyaya, head of Americas G10 FX Strategy at Bank of America Merrill Lynch in New York.
"Commodities have been picked up the last day or two and I think you're seeing that in the currency as well."
Gold and silver prices were also higher, up for a third straight session as more violence in Libya and inflation concerns driven by rallying crude-oil and grain prices prompted a recovery in precious metals after last week's sharp sell-off. [GOL/]
The Canadian dollar CAD=D4 closed the North American session at C$0.9577 to the U.S. dollar, or $1.0442, up from Monday's North American session close of C$0.9636 to the U.S. dollar, or $1.0378.
"Canada is getting a net benefit from commodities," said Michael Gregory, senior economist at BMO Capital Markets.
A simultaneous rally in global equities was a sign that risk appetite had been whetted again, benefiting the Canadian dollar, he added.
Currency markets stayed focused on persistent fears that Greece may have to restructure its debt, which may make the Canadian dollar increasingly attractive against the euro, B of A's Upadhyaya said.
"Investors may choose to go long Canada against the euro with the prospects that global growth still is holding up and therefore demand for commodities should remain robust," he said.
On Wednesday, attention will turn to March trade data from Canada and the United States.
Canadian bond prices fell across the curve, owing to a broader pickup in risk sentiment. The two-year Canadian government bond CA2YT=RR shaved off 9 Canadian cents to yield 1.714 percent, while the 10-year bond CA10YT=RR retreated 41 Canadian cents to yield 3.242 percent. (Additional reporting by Ka Yan N; editing by Peter Galloway)
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