CANADA FX DEBT-C$ makes up some ground but still lower

Mon Jan 10, 2011 1:54pm EST
 
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 * C$ lower but off lows
 * Bonds soften across curve
 * Bank of Canada: Weak housing market could hit economy
 * Business optimistic about 2011: central bank says
 By Solarina Ho
 TORONTO, Jan 10 (Reuters) - The Canadian dollar was lower,
but off the day's lows against the greenback on Monday as
rising commodity prices and a firmer euro helped give the
currency support.
 Comments by the Bank of Canada, however, kept gains in
check. The central bank's deputy governor, Agathe Cote, said on
Monday the weakening Canadian housing market could have a
"sizable spillover" effect on other parts of the economy and
that Canadian credit was still growing faster than income.
[ID:nTOR007938]
 Earlier this morning, weaker Chinese data, a falling euro
and commodity prices put pressure on the Canadian dollar, which
gave back some of last week's gains.
 "The currency started weak today, because the euro was
under quite a bit of pressure and as were global equity
markets," said Doug Porter, deputy chief economist at BMO
Capital Markets.
 "But since that time, we've seen the currency turn the
corner. Our commodity prices are up today. The quarterly survey
by the Bank of Canada on the business outlook was solid and
generally positive and finally we have seen the euro make a
little bit of a recovery from its lows today."
 The Bank of Canada said Canadian companies were optimistic
about the outlook for the next 12 months even as they expected
only modest growth. Oil and mining firms were more upbeat about
their sales expectations.  [ID:nN10270585]
 The price of oil, a key Canadian export, climbed more than
1 percent after a leak shut an Alaskan pipeline that carries 12
percent of the U.S. crude output. [O/R]
 At 1:30 p.m. (1830 GMT), the currency CAD=D4 was at
C$0.9933 to the U.S. dollar, or $1.0067, down from Friday's
North American finish at C$0.9918 to the U.S. dollar, or
$1.0083. Earlier, the Canadian dollar hit a low of at C$0.9985
to the U.S. dollar, or $1.0015.
 Overseas, the euro recovered some of its losses after
hitting a four-month low against the U.S. dollar earlier over
Portuguese debt worries. [FRX/]
"That's helped provide a little bit of temporary support. I
don't believe this is necessarily a longer-term turning point,
but it at least provided a little bit of relief today," Porter
said.
 Canadian government bond prices declined across the curve.
 The two-year bond CA2YT=RR was down 1 Canadian cent to
yield 1.717 percent, while the 10-year bond CA10YT=RR was
flat at Canadian cents to yield 3.183 percent.
 (Editing by Peter Galloway)