CANADA FX-C$ stronger in thin markets on Europe optimism

Fri Nov 11, 2011 4:13pm EST
 
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 * C$ at C$1.0112 vs US$, or 98.89 U.S. cents
 * Markets take on risk after Italy vote
 * Bond market closed
 (Updates, adds analyst comment)
 By Andrea Hopkins
 TORONTO, Nov 11 (Reuters) - The Canadian dollar
strengthened in thin trade on Friday as investors headed back
to riskier assets, hopeful that leadership change will put
Italy back on the path to fiscal health and avoid a full-blown
euro zone crisis.
 Global equities surged more than 2 percent and the euro
rallied against the dollar after an Italian vote on economic
reforms eased fears that its debt burden would jeopardize the
euro zone's future. [MKTS/GLOB]
 The Canadian dollar climbed more than a cent in the risk-on
trade, hitting a session high C$1.0107 to the U.S. dollar, or
98.94 U.S. cents, before settling back slightly.
 "It looks like the recent political moves in Europe have
boosted risk sentiment slightly, but I think what you're seeing
are moves in a very thin market," said John Curran, senior vice
president at CanadianForex, a commercial foreign exchange
dealing firm.
 "People are just squaring things up going into this
weekend. There's a lot of event risk in the next couple of
days."
 Canadian bond markets were closed for the Remembrance Day
holiday.
 At 4 p.m. (2100 GMT), the Canadian dollar CAD=D4 was at
C$1.0112, or 98.89 U.S. cents, according to Thomson Reuters
data, well above Thursday's Bank of Canada 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 strengthening on the
risk-on sentiment in the wake of the approval of austerity
measures by Italy's Senate.
 Italy became the latest focus of a still uncontained crisis
that pushed the bond yields of the region's third-largest
economy sharply higher this week. Investors have feared it
could be the next country in the euro zone to need a bailout.
 Curran said in a note that C$1.0280 is a key U.S. dollar
resistance level, while the C$0.9980-C$1.0050 zone should
provide support.
 Jeremy Stretch, head of foreign exchange strategy at CIBC
World Markets in London, said markets remained focused on
Italy, hoping for a positive transition to a new emergency
government to be formed within days, ending the reign of Prime
Minister Silvio Berlusconi.
 Former European Commissioner Mario Monti is widely expected
to take over as head of a broad-based national unity
government, a move many investors would welcome.
[ID:nL5E7MA29Y]
 "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," Stretch said.
 Italy's Senate approved austerity measures demanded by the
European Union that will now go to the lower house, where they
are expected to be passed on Saturday. That vote will trigger
the resignation of Berlusconi. For details, see [ID:nL5E7MB2AT]
 (Editing by Jeffrey Hodgson)