CANADA FX DEBT-C$ jumps on report of Europe debt progress

Tue Oct 18, 2011 4:30pm EDT
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 * C$ at C$1.0144 vs US$, or 98.58 U.S. cents
 * British report spurs risk-on trade
 * U.S. producer prices boost sentiment
 * Bonds give up gains, mostly lower
 By Andrea Hopkins
 TORONTO, Oct 18 (Reuters) - The Canadian dollar ended
higher against its U.S. counterpart on Tuesday in volatile
dealings, emboldened by a British report that suggested
European leaders were making progress on the region's debt
 The euro rallied against the safe-haven U.S. dollar and
Japanese yen, and commodity-linked currencies including the
Canadian dollar followed, driven by a news report that said
France and Germany have agreed to enlarge a euro zone rescue
fund. [FRX/]
 "Details are sketchy but the story is that they are making
some progress on this rescue fund ... and markets are desperate
for positive news on the euro," said Shaun Osborne, chief
currency strategist at TD Securities.
 "This is just another tape bomb that has landed on the
markets in relatively late trading here to induce a little more
volatility in the day's proceedings."
 The Guardian newspaper reported that France and Germany
have reached an agreement to increase the euro zone's rescue
fund, called the European Financial Stability Facility, to 2
trillion euros from the current 440 billion. [ID:nN1E79H1KC]
 The Canadian currency CAD=D3>, already boosted by higher
oil prices and a rally in North American stock markets, surged
on the news late in the day.
 It ended the North American session at C$1.0144 to the U.S.
dollar, or 98.58 U.S. cents, well above Monday's North American
session close of C$1.0221 against the U.S. dollar, or 97.84
U.S. cents.
 Stronger-than-expected U.S. economic data also helped fuel
the market reversal. U.S. producer prices rose at their fastest
pace in five months in September as the cost of gasoline
surged, but the small gain in core prices suggested the
increased price pressure was unlikely to be sustained.
 With euro-zone woes as a backdrop all this week ahead of an
Oct. 23 summit of European leaders, analysts said the Canadian
dollar could be under pressure in the next few sessions.
 "I think heading into the end of the week investors are
going to turn cautious and likely take some risk off table, so
I would expect this nice little run by the Canadian dollar to
unfortunately come to a bit of an end later this week," said
Blake Jespersen, director of foreign exchange sales at BMO
Capital Markets.
 Canadian bond prices gave up early gains to end the day
mostly lower. The two-year Canadian government bond CA2YT=RR
fell 5.5 Canadian cents to yield 1.017 percent, while the
10-year bond CA10YT=RR was down 37 Canadian cents to yield
2.331 percent.
 (Editing by Chizu Nomiyama and Peter Galloway)