CANADA FX DEBT-C$ heads up, bonds fall as equities rally

Tue Mar 17, 2009 4:49pm EDT
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* C$ tracks rallying equities

* Rise overcomes effect of weak Canadian economic figures

* Bonds slip, await outcome of two-day Fed meeting (Updates to close)

By Ka Yan Ng

TORONTO, March 17 (Reuters) - The Canadian dollar firmed against the greenback on Tuesday, making a comeback after dropping early in the day on weak Canadian economic data, as the currency market's appetite for risk was sharpened by strong equity market advances.

The Canadian dollar came under pressure in the morning on news that Canadian factory sales fell sharply in January. It then moved in a wide range of C$1.2669 to C$1.2768 to the U.S. dollar, a band similar to Monday's trading range, and one that the currency has gradually shifted to since hitting a 4-1/2 year low a week ago.

The gains have come largely on the back of six straight higher closes on the Toronto Stock Exchange, and corresponding optimism in U.S. stocks.

"If anything, I think what we're seeing as we see these rallies in dollar/Canada, people are taking advantage of the situation and are getting short given that equities are still fairly firm and levels of risk aversion are declining," said George Davis, chief FX technical analyst at RBC Capital Markets.

The Canadian dollar finished at C$1.2688 to the U.S. dollar, or 78.81 U.S. cents, up from C$1.2735 to the U.S. dollar, or 78.52 U.S. cents, at Monday's close.   Continued...