CANADA FX DEBT-Canadian dollar inches up, bonds mixed

Wed Dec 10, 2008 5:14pm EST
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* Canadian dollar higher on auto aid hopes, oil

* Bonds mixed, longer term trend for yields to fall remain

TORONTO Dec 10 (Reuters) - The Canadian dollar edged higher against a generally weakening U.S. dollar on Wednesday, supported by hopes for a rescue plan for ailing U.S. automakers and by higher oil prices.

Bond prices were higher on the short end as investors stepped back into stocks.

The Canadian dollar finished the largely rangebound North American session at C$1.2596 to the U.S. dollar, or 79.39 U.S. cents, up from C$1.2646 to the U.S. dollar, or 79.08 U.S. cents, at Tuesday's close.

There was little homegrown news to drive the Canadian currency, and it was unable to revisit the 80 U.S. cent level from overnight as it moved in a range of C$1.2554 to C$1.2646 during the North American session.

But risk tolerance in the currency market was boosted by hopes that U.S. lawmakers would finalize an agreement to save the Big Three automakers and it pushed the U.S. dollar to a two-week low against the euro.

"It looks like U.S. dollar weakness is the main contributor. You can make the case that the Canadian dollar really hasn't kept pace with some of the others out there like the euro and pound," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"Canada isn't really a notable outlier today."   Continued...