CANADA FX DEBT-C$ rises with risk tolerance, bonds gain

Wed Mar 18, 2009 10:01am EDT
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* C$ rises despite more weak Canadian economic figures

* Risk appetite increases, helps Canadian dollar rise

* Bonds gain as stocks fall, await Fed statement

TORONTO, March 18 (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday morning, extending recent gains made on improving risk sentiment.

The Canadian dollar has largely been tracking North American stock markets, and much of its stronger tone since hitting a 4-1/2 year low last week has come on the back of a string of higher closes on equity markets.

Although U.S. and Canadian equity markets opened lower on Wednesday, the Canadian dollar held on to most of its gains as the euro rose versus the dollar to trade above $1.31 for the first time since January. [ID:nN18342829]

At 9:45 a.m. (1345 GMT), the Canadian dollar rose to C$1.2649 to the U.S. dollar, or 79.06 U.S. cents, from C$1.2688 to the U.S. dollar, or 78.81 U.S. cents, at Tuesday's close. At one point, the currency rallied as high as C$1.2610 to the U.S. dollar, or 79.30 U.S. cents.

"We're seeing some indications of improving tone in equity markets, resulting in funds moving out of the U.S. dollar. A number of other currencies are benefiting, including the Canada, as markets become a bit more sure that the depths of this downturn may be contained," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

The optimism on equity markets in recent days has underscored a decline in risk aversion and has overcome Canadian data that has reinforced views that the economy is undergoing a major slowdown.   Continued...