CANADA FX DEBT-C$ hits two-week high on revived risk appetite

Thu Feb 11, 2010 1:31pm EST
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 * C$ jumps to 95.39 U.S. cents
 * C$ highest vs euro since Dec. 2007
 * Bonds hurt by rising risk appetite
 By Claire Sibonney
 TORONTO, Feb 11 (Reuters) - Canada's currency jumped to a
two-week high against the U.S. dollar on Thursday, as a stable
economic backdrop boosted investors' confidence and appetite
for risk.
 Overnight, the Canadian currency reacted positively to
stronger than expected Australian jobs data, which sent the
greenback lower, as well as a rise in commodity prices.
 "We've seen quite a big move in some of the Canadian dollar
crosses," said Shaun Osborne, chief currency strategist at TD
Securities, referring to the Canadian dollar reaching its
strongest level against the euro since December 2007 at
 "It continues to highlight just how Canada has really held
up over the course of the last few weeks in the period of
fairly significant uncertainty and broader market volatility,"
he said.
 "The financial sector is holding up relatively well, the
fiscal situation in Canada being much more sustainable than
some of its larger economy peers, and people like the Canadian
dollar story at the moment," Osborne said.
 At 1:24 p.m. (1824 GMT) the Canadian dollar was at C$1.0483
to the U.S. dollar, or 95.39 U.S. cents, up from Wednesday's
close at C$1.0630, or 94.07 U.S. cents. Earlier, the currency
hit C$1.0480 to the U.S. dollar, or 95.42 U.S. cents, its
highest level since Jan. 22.
 The commodity-linked currency got additional support from a
rise in oil and gold prices, but Osborne did not think that was
a big factor in today's move.
 "We have seen a bit of a bounce in crude prices but I think
it (the currency's rise) reflects the general confidence in the
outlook for the Canadian dollar more than anything specific at
the moment," he said.
 Oil steadied above $74 per barrel after European leaders
reached a deal to rescue the Greek economy while bullion prices
climbed to near a one-week high. [O/R] [GOL/]
 Osborne said the Canadian dollar broke through a key level
of short-term support, which was around C$1.0550 to the U.S.
dollar, this morning.
 "Now, I'd be looking at C$1.0400 to C$1.0410 ... so if we
break that we could we a very rapid move back towards C$1.02,"
he said.
 With risk appetite back on, Canadian bond prices were
mostly lower across the curve.
 "People, I think, have been parking their money in the
fixed-income area over the last couple of weeks given the
uncertainty that's been present in Europe," said George Davis,
chief technical strategist at RBC Capital Markets.
 "But, given that equity markets are stabilized now, that
certainly has triggered people to get out of their fixed income
 The two-year bond CA2YT=RR was down 10 Canadian cents at
C$100.220 to yield 1.390 percent, while the 10-year bond
CA10YT=RR was off 38 Canadian cents at C$102.100 to yield
3.483 percent.
 (Reporting by Claire Sibonney; editing by Rob Wilson)