CANADA FX DEBT-C$ firmer after surprise ECB rate cut

Thu Nov 3, 2011 9:37am EDT
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   * C$ at C$1.0096 vs US$ or 99.05 US cents
 * Spiked to session high after surprise ECB rate cut
 * Bond prices fall
 By Andrea Hopkins
 TORONTO, Nov 3 (Reuters) - The Canadian dollar strengthened
to a session high against its U.S. counterpart on Thursday
after the European Central Bank announced a surprise cut to
interest rates, adding to market volatility as Greece's role in
the euro zone was questioned.
 Global stock markets rose, the euro turned higher and
government debt fell to session lows after the unexpected
quarter-point cut by the ECB, a move that adds to stimulus
measures elsewhere and buoyed hopes for an economic recovery.
 "Risk proxies are taking well to the ECB decision to cut
interest rates, which caught everybody off guard," said David
Watt, senior currency strategist at Royal Bank of Canada.
 "It looks like we're got policy stimulus coming from the
U.S., policy stimulus coming from Japan to the extent that they
can, policy stimulus from the UK and policy stimulus from the
ECB, which begins to ease some of the cyclical concerns as we
head towards year-end."
 The Canadian dollar CAD=D3  spiked to a session high
C$1.0055 to the U.S. dollar, or 99.45 U.S. cents, shortly after
the rate cut, pushing through the 50-day moving average, before
settling back somewhat.
 At 9:23 a.m. (1323 GMT), the Canadian dollar stood at
C$1.0096 to the U.S. dollar, or 99.05 U.S. cents, still well
above Wednesday's North American session close at C$1.0136 to
the U.S. dollar, or 98.66 U.S. cents.
 Watt said the currency could test parity again, depending
on how much stocks rally on the rate cut, but that remaining
European uncertainty and the chaos of Greece's plan for the
bailout package would likely limit gains.
 "The 100-day moving average is C$0.9892, that's probably
too far to carry that far. I think the bulk of the impact from
the ECB is probably built in by now," Watt said.
 A Reuters poll released on Thursday showed the Canadian
dollar is expected to hold steady just below parity in the next
few months before regaining equal status in 6 months and edging
higher than the greenback a year from now.  [CAD/POLL]
 A poll of 49 global foreign exchange strategists showed
slightly more buoyant forecasts for the Canadian currency in
the near term than in a similar poll a month ago.
 Developments in Greece remained in focus as chaos over
Greece's role in the euro zone continued.
 Speculation that Prime Minister George Papandreou would
resign was widespread, a move that would mean a new government
and a reversal of plans for a plebiscite that could lead to a
disorderly default by Greece on its bonds.
 The threat of a Greek default and exit from the euro hung
over a meeting of G20 leaders after France and Germany made it
clear that Athens must decide urgently whether it wants to stay
in the 12-year-old currency bloc.
 Canadian government bond prices were lower across the
curve. The two-year bond CA2YT=RR fell 10 Canadian cents to
yield 1.018 percent, while the 10-year bond CA10YT=RR dropped
42 Canadian cents to yield 2.218 percent.
 (Editing by Jeffrey Hodgson)