CANADA FX DEBT-C$ higher, but returns some of overnight gains

Tue May 19, 2009 9:27am EDT
 
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 * C$ hits overnight high of 86.60 U.S. cents
 * Weak U.S. data eats away at C$'s gain
 * Bond prices lower across the curve
 By Frank Pingue
 TORONTO, May 19 (Reuters) - The Canadian dollar was higher
versus the greenback on Tuesday as an upbeat tone in equities
gave a boost to the commodity-based currency, but it returned
some of the gains after weak U.S. data sapped risk appetite.
 Canada's currency was dragged from its overnight high after
data showed a steep drop in U.S. housing starts that rekindled
worries that the worst of the global financial crisis has not
passed. [ID:nN18349440]
 But the domestic currency still held above its close on
Friday given the size of the rally it enjoyed on Monday and
overnight when an upbeat tone in U.S. and overseas' equity
markets kept demand for perceived riskier currencies alive.
 "It's all the risk aversion theme, all equity markets, and
I think that the FX markets in general will continue to derive
their direction from stocks," said George Davis, chief
technical strategist at RBC Capital Markets.
 "But the mood has been spoiled a little bit by the housing
starts data in the U.S. because they came out weaker than
expected ... but if stocks are able to rally we should see (the
U.S. dollar) sell off as risk aversion decreases."
 At 9:15 a.m. (1315 GMT), the Canadian unit was at C$1.1607
to the U.S. dollar, or 86.15 U.S. cents, up from C$1.1791 to
the U.S. dollar, or 84.81 U.S. cents, at Friday's close.
 The Bank of Canada did not give an official close for the
Canadian dollar on Monday as it was a holiday in Canada.
 The Canadian dollar rallied as high as C$1.1548 to the U.S.
dollar, or 86.60 U.S. cents overnight, which marked its highest
level since May 12.
 Canadian bond prices were pinned lower across the curve in
a delayed reaction to Monday's activity when the U.S. Treasury
market fell on hopes that the recession was easing, which
lessened the appetite for more secure government debt.
 (Editing by Jeffrey Hodgson)