CANADA FX-C$ little changed; optimism on Italy supports
* C$ at C$1.0185 vs US$, or 98.18 U.S. cents
* Markets take on risk amid Italy optimism
* Bond market closed
By Andrea Hopkins
TORONTO, Nov 11 (Reuters) - The Canadian dollar was little changed on Friday as investors trickled back to riskier assets, cautiously hopeful that leadership change will put Italy back on the path to fiscal health and avoid a euro zone crisis.
European shares rose, the euro eked out modest gains and North American stock index futures pointed to a higher open, helping the Canadian currency recover from overnight lows. Canadian bond markets were closed for the Remembrance Day holiday. [MKTS/GLOB]
"The Canadian dollar is holding up comparatively well. We're having an attempt to perpetuate a risk-on mentality into the close of the week," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.
"Markets are relatively quiet here because although it is a normal day here, there is not a great deal of data to get excited about and obviously with North America largely out, it is absent too much volatility."
At 9:20 a.m. (1420 GMT), the Canadian dollar CAD=D4 stood at C$1.0185 to the U.S. dollar, or 98.18 U.S. cents, slightly below Thursday's North American close at C$1.0177 to the U.S. dollar, or 98.26 U.S. cents.
It had weakened as far as C$1.0232 to the U.S. dollar, or 97.73 U.S. cents, overnight, before regaining ground on the risk-on sentiment.
John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm, said dollar-Canada trade seemed comfortable within 100-point daily ranges.
"A move to the C$1.0100 area may still be in the cards but the market has definitely adopted a 'buy USD on dips' mentality," Curran said in a morning note to clients.
"Moving into next week the C$1.0280 level is key resistance and, as mentioned before, a daily/weekly breach will open the door for a test of higher levels. Support remains in the C$0.9980-C$1.0050 zone."
Stretch said markets remained focused on Italy, hoping for a trouble-free vote on Friday on austerity steps demanded by the European Union. This would pave the way for a new emergency government to be formed within days, ending the reign of Prime Minister Silvio Berlusconi. Mario Monti, the former European Commissioner, has emerged as favorite to replace Berlusconi. [ID:nL3E7MB0HF]
"(Italy) is the factor that we are monitoring. I've got a screen up with Italian 10-year yields, which underlines the key market dynamics .... and it still remains that markets are less fearful than were 24, 48 hours ago," Stretch said.
"We're assuming that come early next week we'll have a smooth transition from Mr. Berlusconi to Monti, who as a technocrat not beholden to the electorate, and as an EC insider, can take the requisite decisions and get Italy back on the right path. For the moment that's how the markets are reading it and that's providing a degree of confidence."
Volume should be light because of the Remembrance Day holiday, possibly giving headline risk an exaggerated impact on the currency. (Editing by Jeffrey Hodgson)
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