CANADA FX DEBT-C$ firms; gains capped on Irish deal caution

Mon Nov 22, 2010 9:35am EST
 
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   * C$ higher at 98.43 U.S. cents
 * Bonds climb across curve, follow U.S. Treasuries
 By Jennifer Kwan
 TORONTO, Nov 22 (Reuters) - Canada's dollar edged slightly
higher against the greenback on Monday, but gains were kept in
check as broader risk aversion crept back into the market as
enthusiasm over an Ireland bailout faded.
 The European Union and International Monetary Fund
tentatively agreed to a bailout package with Ireland, with
loans up to 90 billion euros to resolve its banking and budget
crisis. For details, see [ID:nLDE6AL00M]
 But optimism gave way to caution as investors began
worrying about Ireland's Greens, which pulled the plug on the
deeply unpopular coalition government on Monday by calling for
a national election in January after an EU/IMF bailout package
is in place.
 "The return of risk aversion again emanated from the euro
zone, that is, concerns about the Irish political situation
going forward," said Matthew Strauss, senior currency
strategist at RBC Capital Markets.
 Concerns that Ireland's debt crisis might spread to other
euro zone countries such as Portugal also unnerved financial
markets, said Strauss. Earlier, global markets rallied and
reflected modest relief, but that enthusiasm waned. [MKTS/GLOB]
 Global markets were largely weaker, as were commodity
prices. [MKTS/GLOB] [O/R] [MET/L]
 Still, Canada managed to eke out gains, in part, given its
strong fiscal position, said Strauss.
 "If we look at sovereign debt issues Canada actually stands
out as one of the best G10 countries when it comes to sovereign
debt issues," he said.
 At 9:10 a.m. (1410 GMT), the Canadian dollar was at
C$1.0160 to the U.S. dollar, or 98.43 U.S. cents, up from
Friday's close at C$1.0180 to the U.S. dollar, or 98.23 U.S.
cents.
 Strauss said he sees a near-term technical range between
C$1.0063 to the U.S. dollar, a high reached in early October
and key U.S. dollar support level, and resistance at C$1.0253.
 Canadian bond prices were flat to firmer, tracking U.S.
Treasuries, which were steady after Ireland deal and ahead of
two-year debt supply. [US/]
 The two-year bond CA2YT=RR was up 4 Canadian cents to
yield 1.632 percent, while the 10-year bond CA10YT=RR gained
19 Canadian cents to yield 3.120 percent.
 (Editing by Jeffrey Hodgson)