CANADA FX DEBT-C$ lifted by oil and euro strength

Thu Mar 24, 2011 5:27pm EDT
 
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   * C$ closes at C$0.9762, or $1.0244
 * Most bond prices end lower
 * May election expected; majority gov't could boost C$
 (Updates with details, comments)
 By Solarina Ho
 TORONTO, March 24 (Reuters) - The Canadian dollar finished
higher against the U.S. dollar on Thursday, getting support
from firm oil prices and from the resilience of the euro
despite Europe's debt problems.
 Supply worries and growing unrest in the Middle East kept
U.S. oil prices steady above $105 a barrel, helping push up the
commodity-linked Canadian dollar, which is often driven by the
oil price. [O/R]
 The euro strengthened against the U.S. dollar on optimism
that European policymakers would be able to control a political
and debt crisis in Portugal. [FRX/]
 "We actually saw a nice move higher in the euro and the
(U.S.) dollar basically came under pressure across the board,"
said George Davis, chief technical strategist at RBC Capital
Markets.
 "The markets are quite surprised with how resilient the
euro's been given what's happened in the last 24 hours ...The
euro has been able to shake that off and strengthen against the
dollar, so the general sentiment is still bearish vis-a-vis the
U.S. dollar."
 The currency CAD=D4 closed at C$0.9762 to the U.S.
dollar, or $1.0244, up from Wednesday's North American finish
of C$0.9807, or $1.0197. It traded between a high of C$0.9732
and a low of C$0.9826 during the session.
 The currency has rebounded from weakness earlier this week
when worries over Japan's earthquake disaster, the global
economic outlook and uncertainty over a possible Canadian
federal election weighed.
 With no major Canadian economic data on tap, attention will
be cast on the likelihood of a federal election. Canada's
minority Conservative government is expected to fall in
Parliament on Friday following opposition charges of
incompetence and questionable ethics and after the opposition
rejected the government's budget plan on Tuesday.
 An election in early May is now seen, but it may not change
the political landscape dramatically with polls showing the
Conservatives will return with a minority government. Analysts
said that if a majority government is elected, the resulting
political stability could give the Canadian dollar a boost.
[ID:nN23287439] [ID:nN23200321]
 "I think the market went long dollar just on the political
risk and I think the worst-case scenario that's going to happen
is there's going to be another election and we're going to get
a minority government, which is what we have right now," said
David Bradley, director of foreign exchange trading at Scotia
Capital.
 BONDS LOWER
 Canadian government bond prices were mostly lower,
mirroring easing prices in the U.S. Treasury market. [US/]
 "Sentiment has been fairly negative for the last two
trading days. I think we're seeing a little bit of carry over
from that ... There's some lingering concerns about inflation
in the pipeline and I think that's hanging over the markets a
little bit,"  RBC Capital's Davis said.
 The Bank of Canada said on Thursday it will hold 10 bond
auctions, including one real return issue, in the second
quarter of 2011. The first auction, of two-year bonds, will be
on April 6, with details to be released on March 31.
[ID:nTZONEE7UB]
 The two-year bond CA2YT=RR was off 5.5 Canadian cents to
yield 1.709 percent, while the 10-year bond CA10YT=RR shed 2
Canadian cents to yield 3.217 percent.
 (Editing by Peter Galloway)