CANADA FX DEBT-C$ higher but gives up early gains; bonds firm

Wed Jul 21, 2010 12:17pm EDT
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* C$ at C$1.0438 per US$, or 95.80 U.S. cents

* Bonds prices firm across curve (Updates to midday)

TORONTO, July 21 (Reuters) - The Canadian dollar was slightly higher against the U.S. currency at midday on Wednesday, but well off a near one-week high, as it retreated with weakening equities and declining oil prices.

Overnight, the Canadian dollar had jumped almost a penny to touch a session high of C$1.0351 to the U.S. dollar, or 96.61 U.S. cents.

The early gains came from rallying global stocks and oil prices, after healthy earnings from Apple Inc AAPL.O, and other companies whetted investor appetite for riskier assets and currencies.

But the optimism faded as North American stocks turned lower on uncertainty ahead of U.S. Federal Reserve Chairman Ben Bernanke's testimony before Congress at 2 p.m. (1800 GMT).

In addition, oil slipped to around $77 a barrel after data showed a surprise increase in U.S. crude supplies after widespread predictions of a drawdown. The price of oil often offers direction for the commodity-linked Canadian dollar. [O/R]

At 11:50 a.m. (1550 GMT), the Canadian dollar CAD=D4 was at C$1.0438 to the U.S. dollar, or 95.80 U.S. cents, up slightly from Tuesday's finish at C$1.0448 to the U.S. dollar, or 95.71 U.S. cents.

"Equity markets are bailing, that is first and foremost the biggest correlation factor," said Jack Spitz, managing director of foreign exchange at National Bank Financial.   Continued...