CANADA FX DEBT-C$ perks up in risk play ahead of BoC

Wed Sep 7, 2011 8:19am EDT
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*C$ at C$C$0.9864 vs US$ or $1.0138

*Bonds prices fall across curve

*Bank of Canada rate announcement at 9 a.m.

By Claire Sibonney

TORONTO, Sept 7 (Reuters) - The Canadian dollar edged slightly higher against its U.S. counterpart on Wednesday morning as global risk sentiment rebounded and investors awaited a Bank of Canada interest rate decision.

World stocks rose from a two-week low and the euro rallied across the board after Germany's top court rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other euro zone countries. [MKTS/GLOB]

Higher prices, boosted by expectations of lower U.S. crude stocks, also underpinned commodity-linked currencies such as Canada's, as did better-than-expected Australian growth numbers overnight. [O/R] [ID:nL3E7K70A2]

Matt Perrier, director of foreign exchange sales at BMO Capital Markets, said he expected the Canadian dollar to react more to global factors on Wednesday, and less on the central bank's policy announcement at 9 a.m. (1300 GMT), in which a more dovish tone has largely been factored in.

Higher interest rates tend to strengthen currencies by attracting international capital flows, and vice versa.   Continued...