CANADA FX DEBT-C$ extends gains as oil price, equities rise
* C$ rises more than a penny to 96.49 U.S. cents
* Bonds lower across the curve
* Bank of Canada cuts 2010 quarterly forecasts
* Canada May retail sales unexpectedly dip, details soothe (Adds details)
By Ka Yan Ng
OTTAWA, July 22 (Reuters) -The Canadian dollar added to gains versus its U.S. counterpart on Thursday as oil prices jumped to their highest level in more than three weeks, while a rally in equity markets also helped boost sentiment.
U.S. crude oil futures rose more than $2 to approach $79 a barrel on an increased possibility of a tropical storm in the Gulf of Mexico and as better-than-expected economic data gave a lift to equities markets. [O/R]
Toronto's main stock market index was up more than 1 percent, while major U.S. stock indexes were up more than 2 percent, overcoming some of the negative sentiment on the pace of economic recovery that was sparked by U.S. Federal Reserve Chairman Ben Bernanke's downbeat testimony on the U.S. economy on Wednesday.
"I think probably the only thing positive for the Canadian dollar really today has been quite a sharp jump in oil prices, and generally a bit more risk appetite in the markets," said Shaun Osborne, chief currency strategist at TD Securities.
At 1:25 p.m. (1725 GMT), the Canadian currency CAD=D4 was at C$1.0364 to the U.S. dollar, or 96.49 U.S. cents, up from Wednesday's finish of C$1.0477 to the U.S. dollar, or 95.45 U.S. cents.
The Canadian dollar pared gains after data showed Canadian retail sales fell unexpectedly in May for the second straight month, but underlying details showed the decline was largely from price distortion and volume of sales had climbed in the month. [ID:nN2215189]
In its quarterly Monetary Policy Report, the Bank of Canada cut its growth forecasts for each quarter of 2010, warning for a second time this week that global economic uncertainty and cooling domestic consumption will dampen the recovery. The MPR did little to change market expectations on future rate hikes. [ID:nN22208118]
"In terms of market pricing, we haven't seen a whole lot of significant change in rate expectations. After the MPR, we're still about 60 percent priced for a September rate increase, which is very similar to where we were last night," Osborne said.
With risk appetite seeping back into the market, Canadian bond prices were lower across the curve, tracking U.S. Treasuries. [US/]
The two-year bond CA2YT=RR lost 5 Canadian cents to yield 1.542 percent, while the 10-year bond CA10YT=RR shed 40 Canadian cents to yield 3.207 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)
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