November 19, 2010 / 10:01 PM / 7 years ago

CANADA FX DEBT-C$ ticks higher on firm equity markets

* C$ slightly up at 98.23 U.S. cents

* Bond prices weaken

(Updates to close)

By Claire Sibonney

TORONTO, Nov 19 (Reuters) - Canada's dollar firmed against the greenback on Friday, helped by rising equity markets, but China's move to tighten monetary policy pressured resource prices and kept the commodity-linked currency in a tight range.

China ordered lenders to lock up more of their money at the central bank for the second time in two weeks, stepping up its battle to pull excess cash out of the economy before inflation has a chance to take off. [ID:nL3E6MJ0N8]

The move hit the price of oil and base metals but was brushed off by fairly solid North American stocks. [.N] [.TO]

"The U.S. dollar itself is mixed with commodity currencies including Canada being weighed upon by the drop in correlated prices," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

"Equities on the other hand are marginally higher, which would put a bid to risk, which should theoretically put a bid to the Canadian dollar."

The Canadian dollar CAD=D4 closed at C$1.0180 to the U.S. dollar, or 98.23 U.S. cents, up slightly from Thursday's finish at C$1.0215 to the U.S. dollar, or 97.90 U.S. cents. The currency was down 0.9 percent for the week.

Spitz said the Canadian dollar was still more or less flat against its U.S. counterpart, having seen more action and volatility on the crosses on Friday, as it was sold against the euro and bought against the yen.

Levels providing near-term support for the Canadian dollar are C$1.0260 to C$1.0340. Parity still represents a significant support level for the greenback, he said.

BOND PRICES SAG

With more risk on the table, Canadian government bond prices were slightly down, with the two-year bond CA2YT=RR off 2 Canadian cents to yield 1.649 percent, while the 10-year bond CA10YT=RR lost 15 Canadian cents to yield 3.145 percent.

"We're not following the U.S. today," said Sheldon Dong, fixed-income analyst at TD Waterhouse Private Investment, adding this was because of the U.S. Federal Reserve's quantitative easing plan.

U.S. longer bonds rose after the Federal Reserve bought some of the debt as part of its bond purchase program. [US/]

Dong noted the purchase schedule has been published by the New York Federal Reserve and is therefore no secret, or surprising, to the bond market.

"The stock market is on firm footing so there's no reason for the bond market to rally," he added. (Editing by Jeffrey Hodgson)

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