CANADA FX DEBT-C$ firms after Greek debt sale boosts risk play

Tue Jul 13, 2010 8:29am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]



 * Canadian dollar rises to 96.89 U.S. cents
 * Bonds prices soften across curve
 By Claire Sibonney
 TORONTO, July 13 (Reuters) - The Canadian dollar bounced
higher against its U.S. counterpart on Tuesday as riskier
assets garnered bids after Greece successfully returned to
capital markets for the first time since a massive bailout
package in May.
 Greece sold 1.625 billion euros ($2.03 billion) of 6-month
T-bills at a slightly cheaper cost than the 5.0 percent it pays
to borrow under the 110 billion euro loan that the European
Union and International Monetary Fund put in place to calm a
crisis that has shaken the euro zone. [ID:nLDE66C0DH]
 The Canadian dollar "is basically caught in the risk-on
move that we're seeing running through markets generally
today," said Adam Cole, global head of FX strategy at RBC
Capital Markets.
 "The significant move came after the Greek bill auction
this morning which is being taken by the market as having gone
fairly well to the extent that Greece was able to borrow from
the market at a low rate."
 The smooth auction was offseting the negative effects of
Moody's downgraded of Portugal's debt rating by two notches to
A1 with a stable outlook, Moody's said the government's
financial strength was likely to weaken over the near term.
[ID:nWLA8184]
 Also whetting risk appetite, global equities advanced after
Alcoa Inc AA.N delivered a strong start to the earnings
season and oil rose above $75 a barrel as optimism about the
economic recovery and stronger demand. [MKTS/GLOB] [O/R]
 At 8:00 a.m. (1400 GMT), the Canadian dollar CAD=D4 was
at C$1.0321 to the U.S. dollar, or 96.89 U.S. cents, up from
Monday's finish at C$1.0375 to the U.S. dollar, or 96.39 U.S.
cents.
 "On the day it's doing fairly well in the sense that it's
outperforming the Aussie and the Kiwi, which have both also had
a decent bounce," said Cole.
 "But Canada is outperforming, which is probably a fair
reflection of its fundamentals and something we expect to
continue as the market prices in further Bank of Canada
tightening."
 Yields on overnight index swaps, which trade based on
expectations for the Bank of Canada's key policy rate, showed
the market sees an 87 percent chance of a rate hike at its next
policy announcement on July 20. BOCWATCH [CA/POLL]
 On a technical basis, Cole said the Canadian dollar was
trapped between the range of C$1.0300 to C$1.0420 for now, and
that a break of either side will determine the directional
bias.
 Investors will also be following data on Canada's May's
trade balance, which is expected to narrow from C$0.18 billion
to zero.
 Canadian bond prices fell across the curve as investors
flocked to higher-yielding assets following Greece's debt
sale.
 The two-year bond CA2YT=RR lost 3 Canadian cents to yield
1.699 percent, while the 10-year bond CA10YT=RR shed 13
Canadian cents to yield 3.229 percent.
 (Editing by Padraic Cassidy)