RPT-CANADA FX DEBT-C$ firms as European bank package, U.S. data

Wed Oct 5, 2011 9:27am EDT
 
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 * C$1.0517 vs U.S. dollar, or 95.08 U.S cents
 * Europe bank package, U.S. data buoy risk sentiment
 * Bond prices mixed
 By Andrea Hopkins
 TORONTO, Oct 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart in early trade on Wednesday as a
better-than-expected U.S. employment report and some progress
on the European debt crisis boosted risk appetite.
 European shares and key commodities rose after ministers
agreed to shore up euro zone banks against the spreading debt
crisis and an IMF director said the fund might offer support by
buying Spanish and Italian bonds. [MKTS/GLOB]
 Together with an unexpectedly strong gain in U.S.
private-sector employment, the European news gave some lift to
riskier assets like Canada's commodity-linked currency, though
the probability of a Greek default kept a lid on the rally.
 "Of course there has been an improvement in sentiment after
EU policymakers are potentially looking at recapitalization of
European banks. The market attitude toward risk has picked up,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
 "But the backdrop is challenged, it will remain challenged,
and throwing a tarp of money over banks to recapitalize them is
really trying to find a solution to a problem that is not
likely to go away any time soon."
 At 9:10 a.m. (1310 GMT), the Canadian dollar CAD=D3 stood
at C$1.0517 to the U.S. dollar, or 95.08 U.S. cents, up from
Tuesday's North American session close at C$1.0549 to the U.S.
dollar, or 94.80 U.S. cents.
 It had briefly climbed as high as C$1.0498 to the U.S.
dollar, or 95.26 U.S. cents, a session high, immediately after
U.S. employment data was released.
 U.S. private-sector employers added 91,000 jobs in
September, above economists' expectations of 75,000, a report
by a payrolls processor showed. For more see [ID:nEAPA50EH0].
 Spitz said the market will also be watching for a report on
the U.S. services sector due at 10:00 a.m. (1400 GMT). The
Institute for Supply Management's non-manufacturing index could
boost hopes for the U.S. economic recovery if it shows strong
hiring. The closely watched U.S. nonfarm payrolls report is due
on Friday, as is the Canadian employment report. ECONCA
 Canada-dollar trade should hit technical resistance at
C$1.0680, while support is layered between C$1.0465 and
C$1.0415, Spitz said.
 Separately, a Reuters poll released on Wednesday showed the
Canadian dollar is expected to recover from 13-month lows to
return to equal value with the U.S. dollar in six months' time,
though projections are not as buoyant as they were before
September's global meltdown. [CAD/POLL]
 Median forecasts in a poll of 48 global foreign exchange
strategists released showed the currency is seen at C$1.04 to
the U.S. dollar, or 96.15 U.S. cents, one month from now, well
above the 13-month low of C$1.0658 to the U.S. dollar, or 93.83
U.S. cents reached this week.
 The Canadian dollar is expected to continue to strengthen,
climbing to C$1.02 in three months, C$1.00 in six months and
through parity to C$0.98 in a year's time, the poll showed.
 Bond prices were mixed on Wednesday. The two-year Canadian
government bond CA2YT=RR was unchanged with a yield of 0.882
percent, while the 10-year bond CA10YT=RR gained 3 Canadian
cents to yield 2.097 percent.
 (Editing by Jeffrey Hodgson)