CANADA FX DEBT-Canadian dollar boosted by Berlusconi exit plan

Tue Nov 8, 2011 4:34pm EST
 
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 * C$ closes at C$1.0082 vs US$, or 99.19 U.S. cents
 * Italy news lifts demand for riskier assets
 * Bank of Canada renews 2 percent inflation target
 * Bond prices lower as investors embrace more risk
 (Adds analyst comment. Updates to close)
 By Jennifer Kwan
 TORONTO, Nov 8 (Reuters) - The Canadian dollar edged higher
against the U.S. currency on Tuesday, taking its cue from
rising global markets after Italy's Prime Minister Silvio
Berlusconi confirmed he will resign.
 Berlusconi said he would quit after suffering a humiliating
setback in parliament that showed a party revolt had stripped
him of a majority. [ID:nL6E7M8152]
 The news sent global equities, commodities and the euro
higher as Berlusconi's exit could ease the passage of unpopular
austerity measures needed to reduce debt and lower Italian
government bond yields. [MKTS/GLOB]
 "There seems to be some relief about the European credit
situation now that it looks like Berlusconi will step down,"
said Sal Guatieri, senior economist at BMO Capital Market.
 "There's a sense that Italy might push through more
aggressive budget austerity measures."
 Investors have been concerned that Italy, the euro zone's
third largest economy, could be facing a crisis similar to the
one that forced Greece to seek a bailout.
 The Berlusconi-induced bounce overshadowed news that Canada
pushed back its promised date to balance the budget by a year
as a global economic slowdown takes its toll on a domestic
economy that has outperformed most rivals. [ID:nN1E7A71N4]
 The Canadian government and the Bank of Canada also agreed
to renew without change the central bank's five-year mandate to
target a 2 percent overall inflation rate. [ID:nN1E7A71PZ]
 David Tulk, chief Canada macro strategist at TD Securities,
said he did not expect the announcements to have a discernible
impact on the Canadian currency, especially "against a world
where we're very much following headlines out of Europe right
now."
 The Canadian dollar CAD=D3  finished at C$1.0082 versus
the greenback, or 99.19 U.S. cents, up from Monday's North
American session finish at C$1.0127 versus the U.S. dollar, or
98.75 U.S. cents.
 Canadian government debt prices fell as the modestly
improving risk environment reduced the appeal of safe-haven
bonds.
 The two-year bond CA2YT=RR fell 5 Canadian cents to yield
0.980 percent, while the 10-year bond CA10YT=RR sank 28
Canadian cents to yield 2.190 percent.
 "It all goes back to Europe. It's the main factor driving
markets," said BMO's Guatieri.
 (Editing by Jeffrey Hodgson)