CANADA FX DEBT-C$ tops 80 U.S. cents as yen pressured, oil up

Thu Feb 19, 2009 9:44am EST
 
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 * C$ stages another rally back above 80 U.S. cents
 * Risk appetite and crude prices fuel latest gain
 * Bond prices stuck lower as risk appetite returns
 (Adds details and comments)
 TORONTO, Feb 19 (Reuters) - The Canadian dollar rose versus
the U.S. greenback for a second straight session on Thursday
and topped the 80 U.S. cents level as risk appetite returned
and the price of crude climbed.
 Risk sentiment improved overnight, which gave the Canadian
currency a lift to C$1.2467 to the U.S. dollar, or 80.21 U.S.
cents, before backing off slightly.
 That added to gains recorded in the previous North American
session and further made up for a chunk of the 1.6 percent skid
the currency suffered earlier this week when concerns about a
deepening global recession buoyed the low-yielding greenback.
 "What's driving Canada right now is overall weakness seen
in the U.S. dollar, but more importantly ... an unwind of
Japanese yen longs," said Jack Spitz, managing director of
foreign exchange at National Bank of Canada.
 At 9:25 a.m. (1425 GMT), the Canadian unit was at C$1.2497
to the U.S. dollar, or 80.02 U.S. cents, up from C$1.2581 to
the U.S. dollar, or 79.48 U.S. cents, at Wednesday's close.
 The yen remained under pressure due to worries about the
Japanese economy and political uncertainty. Meanwhile, world
stocks rallied on some better-than-expected corporate results,
helping to cool extreme risk aversion and denting the
safe-haven bid to the U.S. dollar. [FRX/]
 The Canadian dollar also drew some support from oil prices
that headed toward $36 a barrel ahead of U.S. inventory data
and as the U.S. dollar weakened. Canada is a key oil producer
and its currency is often influenced by price swings in the
commodity.
 Talk of of potential bidders for a stake in a Teck Cominco
TCKb.TO coal operation, said to be worth about $2.5 billion,
was also lending the domestic currency some support this week.
 BOND PRICES DROP
 Canadian bond prices were down across the curve, extending
the previous session's drop, as dealers regained an appetite
for risk and pushed aside data that showed Canada's composite
leading indicator fell more than expected.
 Some of the drop in domestic bond prices was being pegged
to spillover from the bigger U.S. Treasury market, which was
down after data showed U.S. producer prices rose faster than
expected in January. [ID:nN18449971]
 "The higher PPI number has had a little bit to do with it
but it's probably more to do with risk," said Benjamin Reitzes,
economist at BMO Capital Markets.
 Reitzes said the leading indicator, while a closely watched
report, did not play a role in the moves in bond prices, which
continued to relinquish more of the hefty gain recorded earlier
this week when investors unloaded riskier assets.
 The next Canadian data due will be the more key consumer
price index report for January on Friday, which is expected to
show the inflation rate held steady in January at 1.2 percent
year-on-year, while consumer prices fell 0.2 percent on the
month.
 "It will be watched closely, but right now inflation isn't
the big worry, so unless it's a big surprise I don't anticipate
big moves (in bond prices)," said Reitzes.
 The interest-rate sensitive two-year bond was down 13
Canadian cents at C$102.50 to yield 1.316 percent, while the
10-year bond dropped 43 Canadian cents to C$110.85 to yield
2.906 percent.
 The 30-year slipped 75 Canadian cents to C$124.35 to yield
3.617 percent.
 (Reporting by Ka Yan Ng, additional reporting by Frank Pingue;
Editing by Andrea Ricci)