CANADA FX DEBT-C$ strengthens as U.S. data buoys sentiment

Mon Oct 3, 2011 12:00pm EDT
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 * C$1.0466 vs US dollar, or 95.55 U.S cents
 * U.S. factory data stronger than expected
 * European debt woes still weigh
 * C$ touched 2011 low overnight
 * Bond prices still higher across the curve
 By Andrea Hopkins
 TORONTO, Oct 3 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Monday after U.S. data showed
factory strength may keep Canada's largest trading partner out
of recession.
 U.S. factory activity expanded at a faster pace than
expected in September as production and hiring increased, a
report by the Institute for Supply Management (ISM) showed.
 "That manufacturing ISM, being much better than expected,
definitely helped the (Canadian) dollar. It had weakened
throughout the morning but we've had a solid rebound on the
back of that strong U.S. data," said Benjamin Reitzes,
economist at BMO Capital Markets.
 "It suggests that sentiment may be weaker than the actual
economic data."
 A separate report out on Monday showed Canadian
manufacturing activity picked up pace for a third straight
month in September, adding to hope the economy will avert
another recession. [ID:nT5E7K902M]
 At 11:38 a.m. (1538 GMT), the Canadian dollar CAD=D3
stood at C$1.0466 to the U.S. dollar, or 95.55 U.S. cents, up
from Friday's close at C$1.0482 to the U.S. dollar, or 95.40
U.S. cents.
 It earlier hit C$1.0524, its weakest level since September,
 Adam Cole, global head of FX strategy at RBC Capital
Markets in London, said the Canadian dollar should trade in a
range between C$1.04-C$1.0525 "unless we see a really big sell
off in equity markets."
 He said traders are still closely watching Europe with no
major news on the economic front in Canada due out until
employment data is released on Friday. ECONCA
 World stocks, oil and the euro slid on Monday after Athens
admitted it will miss deficit targets. [MKTS/GLOB]
 Draft budget figures showed Greece would miss its deficit
targets for both this year and next, which could force the
country to seek more bailout funds. If it fails to get the
financing, the government may be forced to default, an outcome
that could accelerate a slide back into global recession. For
details, see [ID:nL5E7L20IT]
 Concerns about the European banking sector also sent the
euro to an 8-1/2 month low against the dollar, although it
recovered ground later after the U.S. data release.
 Canadian banks have said they have little to no exposure to
Greek debt.
 Bond prices were higher across the curve. The two-year
Canadian government bond CA2YT=RR was up 2 Canadian cents to
yield 0.874 percent, while the 10-year bond CA10YT=RR gained
35 Canadian cents to yield 2.116 percent.
 (Editing by Jeffrey Hodgson)