CANADA FX DEBT-C$ gains in early trade as risk appetite rises

Wed Oct 19, 2011 9:18am EDT
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 * C$ at C$1.0094 vs US$, or 99.07 U.S. cents
 * Equities, euro higher on Europe optimism
 * Bond prices lower
 By Andrea Hopkins
 TORONTO, Oct 19 (Reuters) - The Canadian dollar gained
ground against its U.S. counterpart in early trade on Wednesday
on optimism that European policymakers are tackling the
region's debt crisis, boosting risk-on trade.
 European stocks and the euro rose on optimism that finance
leaders will take major steps at a summit this weekend to
tackle the festering debt crisis, offsetting the market impact
of a cut in Spain's sovereign credit rating. [MKTS/GLOB]
 "Clearly we were seeing risk appetite back on the table
during the majority of the morning session (in Europe)," said
Jeremy Stretch, head of foreign exchange strategy at CIBC World
Markets in London.
 The euro and commodity-linked currencies including the
Canadian dollar were stronger in early trade amid the buoyant
 At 9:03 a.m. (1303 GMT), the Canadian dollar was near
C$1.0094 to the U.S. dollar, or 99.07 U.S. cents, well above
Tuesday's North American session close at C$1.0144 to the U.S.
dollar, or 98.58 U.S. cents.
 Stretch said the currency would likely stay within the
session ranges already set, strengthening back down to C$1.0060
to the U.S. dollar if there is another bout of risk-on trade or
weakening to C$1.0160 if sentiment fades.
 "If we do have a plummeting in risk appetite into the close
of the U.S. session we could get toward C$1.02 or beyond, but
it would have to be a very negative scenario into the close."
 German Bund futures FGBLc1 were lower as safe-haven
government bonds were sold off on a report in Britain's
Guardian newspaper that France and Germany had agreed on a deal
to increase the euro zone bailout fund's firepower fivefold.
 The reported agreement was later denied by two senior
European Union officials. [nB5E7L5021]
 "Despite the fact the Guardian story was downplayed
relatively  quickly, there is still a degree of hope that the
politicians do grasp the scale of the problem and can actually
come up with something which is reasonably substantive,"
Stretch said.
 "But I think it is a hope rather than an expectation, and
it may well still be a case of buying the rumor and selling the
 Weaker-than-expected Canadian data dampened the Canadian
dollar briefly, while U.S. housing data surged.
 Canada's composite leading indicator dropped by 0.1 percent
in September from August, the first fall in a year, on lower
stock markets and weakness in the manufacturing sector, bucking
market expectations for a 0.1 percent gain. [ID:nN1E79I0AM]
 U.S. housing starts surged in September at their fastest
annual pace in 17 months on a big increase in groundbreaking
for multi-family units, while permits for future construction
fell. [ID:nN1E79I0BT]
 Canadian bond prices fell. The two-year Canadian government
bond CA2YT=RR was down 6.5 Canadian cents to yield 1.048
percent, while the 10-year bond CA10YT=RR was down 37
Canadian cents to yield 2.355 percent.
 (Editing by Jeffrey Hodgson)