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