CANADA FX DEBT-C$ ends 1 percent higher on risk-on mood

Wed Oct 5, 2011 4:36pm EDT
 
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 * C$1.0402 vs U.S. dollar, or 96.14 U.S cents
 * Europe bank package, U.S. data buoy risk sentiment
 * Bond prices fall
 (Updates to close, adds comment)
 By Andrea Hopkins
 TORONTO, Oct 5 (Reuters) - The Canadian dollar gained more
than a cent against its U.S. counterpart on Wednesday as
progress on the European debt crisis and decent economic data
from the United States boosted risk appetite.
 Global stocks and oil prices rebounded on hopeful signs
that authorities are moving to prop up Europe's ailing banking
sector to prevent a full-blown financial crisis. [MKTS/GLOB]
 The rally, spurred further by data on the U.S. services
sector and private-sector business activity showing a slowing
but still-growing U.S. economy, helped boost riskier assets and
commodity-linked currencies like the Canadian dollar.
 "We're just being swept up in the broader feel of the
markets. Equity markets are higher, commodities are higher,
most of the other commodity currencies are doing well," said
Camilla Sutton, chief currency strategist at Scotia Capital.
 "The one percent gain in the Canada dollar is really just a
reflection of risk appetite improving -- and most of that is a
reflection of some recognition from European authorities that a
bank recapitalization was in order."
 The Canadian dollar CAD=D3 ended the North American
session at C$1.0402 to the U.S. dollar, or 96.14 U.S. cents,
just off the session high and well above Tuesday's North
American session close at C$1.0549 to the U.S. dollar, or 94.80
U.S. cents.
 While the currency briefly climbed as high as C$1.0397 to
the U.S. dollar, or 96.18 U.S. cents, near the end of trading,
Sutton said the strength was likely to be short-lived, as
global uncertainties remain entrenched.
 "Even though we've had a great day today, it is not really
substantiated on very much, because a slight shift in tone
coming from Europe (will change sentiment)," Sutton said.
 "I fear we're likely still moving towards a weaker Canada
dollar in the very near term, before it really has the ability
to retrace its losses into year end."
 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.
 Canada's dollar sank through parity with the U.S. greenback
in September and has mostly declined since, as investors shift
to the liquidity and security of the U.S. dollar as the
European crisis and fears of a global slowdown persist.
 U.S. and Canadian employment data, due on Friday, will be
watched for signs of economic growth, and Sutton said markets
will focus on Jean-Claude Trichet's last meeting as president
of the European Central bank on Thursday. ECONCA
 Bond prices were lower across the board on Wednesday. The
two-year Canadian government bond CA2YT=RR lost 3.5 Canadian
cents to yield 0.899 percent, while the 10-year bond
CA10YT=RR lost 23 Canadian cents to yield 2.125 percent.
 Canada's sale of 10-year government bonds saw strong demand
on Wednesday, as fears about Europe's debt crisis and possible
global recession fueled investor hunger for safe-haven assets.
[ID:nN1E79417M]
 (Editing by Jeffrey Hodgson)