CANADA FX DEBT-C$ firms on U.S. data, Italian auction relief
* C$ ends higher at C$1.0303 vs US$, or 97.06 U.S. cents
* C$ hits high of C$1.0259 or 97.48 U.S. cents
* Bond prices slip across the curve (Adds analyst comment, updates to close)
By Claire Sibonney
TORONTO, Nov 29 (Reuters) - The Canadian dollar hit a one-week high against the U.S. currency on Tuesday as investors latched on to positive signs from an Italian debt sale and U.S. consumer confidence data.
Investors were somewhat relieved by Italy's success in selling 7.5 billion euros in bonds even if its cost of borrow hit a euro lifetime high of nearly 8 percent. [MKTS/GLOB]
The auction helped drive the Canadian dollar CAD=D4 to an intraday high of C$1.0259 against the greenback, or 97.48 U.S. cents, its strongest level in more than a week.
"I'm quite sure that (Italy's central bank) was on the phone for the last three or four days saying to their local banks you better buy, you better show up," said Sheryl King, head of Canadian economics at Bank of America-Merrill Lynch.
"We saw it in news reports that they were basically beating the drums very loudly from a patriotic point of view."
The Canadian dollar and other commodity-linked currencies have taken much of their direction from Europe in recent months, given the potential for the debt crisis there to derail global growth.
Also helping sentiment, the Conference Board, an industry group, reported U.S. consumer confidence bounced back in November from a 2-1/2-year low as worries about job and income prospects eased. [ID:nN1E7AS0H6]
But riskier assets including the Canadian dollar pared much of their early gains as euro zone ministers struggled to ramp up the firepower of the regional rescue fund and raised the possibility of asking the International Monetary Fund for more help. [ID:nL5E7MT63A]
By the end of the North American session, the currency retreated to close at C$1.0303 to the U.S. dollar, or 97.06 U.S. cents, up from Monday's finish at C$1.0354 to the U.S. dollar, or 96.58 U.S. cents.
Analysts and strategists warned that Europe's problems are far from being resolved after the latest big bond auction.
"You can say that the yield levels are ruinous, they're unsustainable. Yes, absolutely. But I think the market was in the short term more worried the auction was going to be covered," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.
The Canadian currency's move higher on Tuesday follows its sharp ascent the day before as investor optimism was lifted by renewed risk appetite following a holiday-thinned week of trading.
After clawing back from the C$1.05 levels breached on Friday, Stretch said the next significant resistance levels for the Canadian dollar are seen at C$1.0240-45, with support around C$1.0375-80.
Canadian government bond prices retreated across the curve, tracking U.S. Treasuries lower amid the pick-up in risk appetite.
The two-year bond CA2YT=RR fell 6 Canadian cents to yield 1.007 percent, while the 10-year bond CA10YT=RR lost 14 Canadian cents to yield 2.138 percent.
In issuance news, the province on Ontario on Tuesday sold C$1.0 billion of 30-year notes in a reopening of an existing 4.65 percent issue. [ID:nN1E7AS0R7] (Additional reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)
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