CANADA FX DEBT-C$ surges on U.S. data, euro zone woes

Wed Nov 24, 2010 1:25pm EST
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   * C$ at 99.09 U.S. cents
 * Hits 1-wk high vs US$, 3-mth high vs euro
 * Bonds slip across the curve
 (Updates to midday, adds details, comments)
 By Claire Sibonney
 TORONTO, Nov 24 (Reuters) - The Canadian dollar rallied on
Wednesday to a one-week high against the greenback and a
three-month high versus the euro, lifted by a slew of strong
U.S. economic data and fears of a spreading euro zone crisis.
 U.S. data showed new claims for unemployment benefits
dropped last week to their lowest level in more than two years,
while consumer spending rose in October and consumer sentiment
perked up this month to its highest level since June.
 "Employment is key to any sort of U.S. recovery being
sustainable. That was probably the highlight from a fundamental
data point of view," said Firas Askari, head of foreign
exchange trading at BMO Capital Markets.
 The improving economic picture boosted North American
equity markets as well as prices for oil and base metals, and
enhanced the bid for Canada's commodity-linked and risk-related
 Askari said the Canadian dollar was so far the day's
outperforming G10 currency, with most of the market's focus
back on Europe.
 Ireland's four-year plan to make 15 billion euros in
savings to bring down its record deficit left investors little
impressed. [ID:nLDE6AM25A]
 At 12:54 p.m. (1754 GMT), the Canadian dollar CAD=D4 was
at C$1.0098 to the U.S. dollar, or 99.03 U.S. cents, up from
C$1.0231 to the U.S. dollar, or 97.74 U.S. cents, at Tuesday's
close. Earlier, it hit a high of C$1.0092 to the U.S. dollar,
or 99.09 U.S. cents, its best level since Nov. 16.
 Against the euro, the Canadian dollar reached C$1.3476, or
74.21 euro cents, its strongest level since Sept. 21.
 As well as the uncertainty over European debt levels, a
Bloomberg report that Russia's central bank has begun adding
small amounts of Canadian dollars to its international reserves
-- which has been expecting since last year -- was also
supportive. [ID:nN24236816]
 Askari said the next near-term support for the U.S. dollar
is the technical retracement level of  C$1.0088.
 He noted liquidity was thin in a holiday-shortened week
ahead of the U.S. Thanksgiving on Thursday, causing "whippy
price action."
 The Canadian dollar's strong performance however meant
corporate Canada was taking an opportunity to buy U.S. dollars
as it retests parity, which could stem some gains.
 But Askari said Canada's strong fundamentals, including
data on Tuesday that showed an unexpected jump in inflation and
healthy retail sales, pointed to more upside for the currency.
 "I do think the Canadian dollar is going to continue to do
well ... and I wouldn't be surprised to see strong employment
numbers next week out of Canada."
 Canadian government bond prices were lower across the
curve, tracking weak Treasury prices after the healthy U.S.
economic data undermined the safe-haven appeal of government
 The two-year government of Canada bond CA2YT=RR was down
16 Canadian cents to yield 1.738 percent, while the 10-year
bond CA10YT=RR  shed 60 Canadian cents to yield 3.180
 (Editing by Rob Wilson)