CANADA FX DEBT-C$ keeps gains after retail data; bonds down

Mon Dec 21, 2009 12:25pm EST
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 * C$ rises to 94.42 U.S. cents
 * Bonds fall as risk appetite grows
 * Canada retail sales gain points to GDP rise
 (Adds details)
 TORONTO, Dec 21 (Reuters) - The Canadian dollar rose
against the U.S. currency on Monday as investors' thirst for
risk rose along with equity markets and oil prices in thin,
pre-holiday trading.
 Better than expected domestic retail sales data also helped
the Canadian currency retain gains against the greenback, which
was rallying against most other major currencies.
 Higher auto sales helped push retail trade up by 0.8
percent in October to a level nearly as high as a year earlier,
before the sharp declines seen in late 2008, Statistics Canada
said. [ID:nN21217072]
 At 12:10 p.m. (1710 GMT), the Canadian dollar was at
C$1.0591 to the U.S. dollar, or 94.42 U.S. cents, up from
Friday's finish at C$1.0660 to the U.S. dollar, or 93.81 U.S.
cents. It was off an earlier high at 94.90 U.S. cents.
 "The debate continues whether the U.S. dollar is slipping
out of its traditional role and into pro-growth mode from a
safe-haven currency. I don't think the final word has been said
on that subject yet, but for the time being we've seen the U.S.
dollar do quite nicely," said Eric Lascelles, chief economics
and rates strategist at TD Securities. 
 "Canada is defying the trend here. The retail sales numbers
are helping a little bit."
 The price of oil CLc1, a key Canadian export, rose
towards $74 a barrel, while Toronto's main stock index also
rallied. The Canadian dollar also often takes direction from
the stock and oil markets as a barometer of risk appetite.
 Canadian bond prices were lower across the curve as
investors found favor with riskier assets such as stocks.
 Major North American equity markets were up about 1
percent, bolstered by oil prices and broker upgrades of key
issues.  [.TO] [STXNEWS/US]
 The domestic retail sales data also reinforced expectations
of a consumer-led gain in real gross domestic product for
October, which would bolster the fourth-quarter reading of
growth after Canada barely exited recession in the last
 That would pave the way for eventual rate increases by the
Bank of Canada if the strength in the economy is sustained. The
central bank has pledged to keep rates low until the end of the
first half of 2010.
 "Often, with retail sales out of the way, the market can
look forward to GDP. It does seem that Canada will get a second
positive figure there and in all likelihood hit quite an
attractive fourth quarter," said Lascelles.
 The two-year government bond CA2YT=RR fell 6 Canadian
cents to C$99.83 to yield 1.339 percent, while the 30-year bond
CA30YT=RR dropped 58 Canadian cents to C$115.72 to yield
4.406 percent.
 Canadian bonds outperformed U.S. treasuries, with the
10-year yield spread widening to 16.6 basis points below its
U.S. counterpart from 13.9 basis points the previous session.
 (Reporting by Ka Yan Ng; editing by Rob Wilson)