CANADA FX DEBT-C$ hits 2-week high on renewed risk appetite

Thu Feb 11, 2010 4:35pm EST
 
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 * C$ jumps to 95.13 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 its
highest level in nearly three weeks against the U.S. dollar on
Thursday, as appetite for riskier assets returned, boosting
global equities and commodity prices.
 A pledge by European leaders to support debt-ridden Greece
eased fears of a possible sovereign default, but a flight to
the Canadian dollar was also attributed to the country's
relatively positive economic fundamentals. [ID:nLDE61A0W2]
 "Canada has been a currency of choice recently because it
doesn't have all the political and fiscal issues that seem to
be dogging Europe and certainly on the fiscal side, the U.S.
right now," said Shane Enright, executive director of foreign
exchange sales at CIBC World Markets.
 "Our banks are seen as far more robust, our fiscal
situation is considerably stronger. On an absolute basis we may
still run deficit but if you compare it to the fiscal state of
other G10 countries, to use as an example the UK and the U.S.
-- and obviously you've seen all the issues now with Greece,
Portugal and Spain -- Canada on a relative basis looks quite
strong."
 The Canadian dollar finished the session at C$1.0512 to the
U.S. dollar, or 95.13 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.
 "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
C$1.4334.
 "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 commodity-linked currency got additional support from a
rise in oil and gold prices, but Osborne did not think that was
the main factor.
 "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
around C$1.0550 to the U.S. dollar, which paved the way for
further gains.
 "Now, I'd be looking at C$1.0400 to C$1.0410 ... so if we
break that we could see a very rapid move back towards C$1.02,"
he said.
 BONDS MOSTLY LOWER
 Canadian bond prices fell, tracking U.S. Treasuries lower
as investors turned to riskier assets after a Greek bailout was
announced and the U.S. government closed out a week of poor
bond sales. [US/]
 "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
holdings."
 Even though Canada's recent bond auctions have been met
with strong demand, its fixed-income market has still reacted
to the rising supply across the border.
 "It's hard to avoid the downdraft that we are seeing in the
U.S. market," added Davis. [US/] [ID:nN10198854]
 The two-year bond CA2YT=RR was down 8 Canadian cents at
C$100.240 to yield 1.380 percent, while the 10-year bond
CA10YT=RR fell 30 Canadian cents to C$102.18 to yield 3.473
percent.
 (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)