CANADA FX DEBT-C$ rises for second session, hits 2 1/2 week high

Tue Nov 10, 2009 4:47pm EST
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 * C$ ends at highest closing level since Oct. 22
 * Bond market closed until Thursday
 By Frank Pingue
 TORONTO, Nov 10 (Reuters) - Canada's dollar erased early
losses to reach its highest close in nearly three weeks versus
the U.S. currency on Tuesday, building on momentum from a sharp
rise in the previous session.
 The currency rose as high as C$1.0486 to the U.S. dollar,
or 95.36 U.S. cents, comfortably off its overnight low of
C$1.0610 to the U.S. dollar, or 94.25 U.S. cents.
 Analysts said the turnaround in the commodity-linked
currency was helped by oil prices that held near $80 a barrel
and some renewed risk appetite given a recent pledge by the
Group of 20 to keep economic stimulus policies in place. But
they also cited broader U.S. dollar weakness.
 "The U.S. dollar is generally mixed today so the Canadian
dollar is definitely outperforming," said Camilla Sutton,
currency strategist at Scotia Capital. "(There's) ongoing
interest in the Canadian dollar and negativity towards the U.S.
 The U.S. currency remained out of favor partly because
investors expect benchmark U.S. interest rates to remain near
zero into 2010 as the economy there recovers from a harsh
 The domestic currency's rally followed a move higher on
Monday that was driven by the G20 promise to maintain stimulus
policies, which also spurred a rise in commodity prices.
 According to Sutton, the Canadian dollar's ability to close
out Monday's session stronger than a support level at C$1.0592
likely implies there is further upside for the currency.
 The Canadian dollar closed at C$1.0501 to the U.S. dollar,
or 95.23 U.S. cents, up from C$1.0574 to the U.S. dollar, or
94.57 U.S. cents, at Monday's close. It marked its highest
close since Oct. 22.
 A Reuters poll from earlier this month showed the Canadian
dollar is expected to stay in a tight range near par with the
greenback for the next year given strong commodity prices and
signs of global economic recovery. [ID:nN04520863]
 Canadian bond prices, with no domestic data to consider,
ended a shortened session barely changed on either side of the
break-even level ahead of data due later this week.
 The next domestic data due out will be Thursday's new house
prices report for September, which will be followed by Friday's
trade gap report for September.
 The Canadian bond market will be closed on Wednesday for
Remembrance Day, while the U.S. bond market will be closed in
observance of Veterans Day.
 The two-year bond CA2YT=RR rose 1 Canadian cent to
C$99.69 to yield 1.404 percent, while the 10-year bond
CA10YT=RR dropped 8 Canadian cents to C$101.90 to yield 3.513
 (Editing by Jeffrey Hodgson)