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