CANADA FX DEBT-C$ firms on U.S. data, Italian auction relief

Tue Nov 29, 2011 4:42pm EST
 
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 * 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)