CANADA FX DEBT-C$ gets sudden boost to top 80 US cents

Tue Feb 24, 2009 1:03pm EST
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* Move pegged to traders exiting long US$ positions

* Bond prices remain mixed across the curve (Recasts with C$ moving higher)

By Frank Pingue

TORONTO, Feb 24 (Reuters) - The Canadian dollar turned higher against the greenback on Tuesday, moving as much as 1 percent off its session low, as investors exited long U.S. dollar positions.

The rally allowed the currency to recoup losses suffered earlier in the session as expectations of a Bank of Canada interest rate cut left little room for optimism that the country's economic fundamentals were better than elsewhere.

"It looks like one decent-sized flow hit the market, caught everybody a bit the wrong way, then we saw it exasperated a bit by some cross Canada buying," said Steve Butler, director of foreign exchange trading at Scotia Capital.

"One thing led to another and we hit some stops when we moved down below the overnight low ... and it looks like people were tripping over themselves a little bit trying to bail out of long U.S. dollar positions."

The Canadian dollar rallied as high as C$1.2396 to the U.S. dollar, or 80.67 U.S. cents, rebounding from a session low of C$1.2540 to the U.S. dollar, or 79.74 U.S. cents.

By 12:40 p.m. (1740 GMT), the currency was at C$1.2465 to the U.S. dollar, or 80.22 U.S. cents, up from C$1.2513 to the U.S. dollar, or 79.92 U.S. cents, at Monday's close.   Continued...