CANADA FX DEBT-C$ hits 3-week high as global stocks, oil climb

Mon Aug 29, 2011 4:35pm EDT
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 * Canadian dollar stronger as global stocks surge
 * C$0.9771 to U.S. dollar, or $1.0234
 * Bonds prices drift lower in risk-on bid
 By Andrea Hopkins
 TORONTO, Aug 29 (Reuters) - The Canadian dollar rose on
Monday, following North American stocks higher, as a Greek bank
merger and a rebound in U.S. consumer spending boosted investor
appetite for riskier assets.
 With London markets closed for a holiday on Monday, volume
was lighter than usual. But global equity markets and oil
rallied as news of a merger between two major banks in Greece
gave investors a rare bit of encouraging news out of Europe and
an unexpected surge in U.S. consumer spending suggested the
economy was not falling back into recession. [ID:N1E77S1AX]
 "We've seen U.S. equities up between two and three percent
today, so the positive correlation between the Canadian dollar
and equities continues to dominate proceedings here," said
Shaun Osborne, chief currency strategist at TD Securities.
 "The focus is really on risk assets and the still-simmering
expectation that we could see more action from the Fed at some
point in the not-too-distant future," he added.
 The Canadian dollar CAD=D4 hit a session high early in
the day of C$0.9741 to the U.S. dollar, or $1.0265, its
strongest level since Aug. 4, before easing back to end the day
at C$0.9771 to the U.S. dollar, or $1.0234. That was up from
Friday's North American close of C$0.9830 to the U.S. dollar,
or $1.0173.
 U.S. stocks soared more than 2 percent in a broad rally,
with the Dow Jones industrial average .DJI up 2.25 percent,
and the Nasdaq Composite Index .IXIC up 3.32 percent. [.N]
 Toronto's main stock index advanced 1.44 percent, with the
energy and financial sectors leading the rally. [.TO]
 Oil also climbed on the rise in consumer spending and
relief that damage from Hurricane Irene was less severe than
expected. [O/R]
 Equity markets have rebounded since U.S. Federal Reserve
Chairman Ben Bernanke said on Friday the central bank's policy
panel would meet for two days next month instead of one to
discuss additional monetary stimulus, offering some hope to the
market of a move then. [nN1E77R0GB]
 Osborne said the Canadian currency would likely trade in a
range between C$0.97 and C$0.99 -- not testing recent highs or
lows -- as investors digest a slew of data out of the United
States this week, including August payrolls, due on Friday, and
await the September meeting of the FOMC.
 "We've had this hint from Mr. Bernanke that there's going
to be a discussion of options, and I think investors are going
to sit tight and probably won't push asset markets too quickly
too far in one way or the other," Osborne said.
 David Bradley, director of foreign exchange trading at
Scotia Capital, said end-of-month equity rebalancing in the
next couple of sessions may also be positive for the Canadian
dollar against the euro, as European stocks have been hit hard
 Bond prices drifted lower in the risk-on environment.
 The two-year bond CA2YT=RR was down 11.5 Canadian cents
to yield 1.067 percent, while the 10-year bond CA10YT=RR shed
60 Canadian cents to yield 2.466 percent.
 (Editing by Jeffrey Hodgson)