CANADA FX DEBT-C$ rises after sell-off over Greek debt crisis

Wed Apr 28, 2010 8:35am EDT
 
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 *C$ at C$1.0130 or 98.71 U.S. cents
 *Bonds prices down across the curve
 By Claire Sibonney
 TORONTO, April 28 (Reuters) -  The Canadian dollar
recovered some lost ground against its U.S. counterpart on
Wednesday, a day after falling 1-1/2 cents as downgrades of
Greek and Portuguese debt spurred investors to flee riskier
assets.
 A day after ratings agency Standard & Poor's downgraded
Greek government debt to "junk" status, sovereign risk
contagion in the euro zone knocked global stocks hard and
pushed the euro to a one-year low against the dollar.
 But on Wednesday a rise in U.S. stock index futures
following the previous day's steep sell-off gave relief to
investors of some other riskier assets, such as the Canadian
dollar. [.N]
 "This morning we're seeing a more muted approach, certainly
from a North American equities perspective. That, along with
better data that's being seen out of Australia and New Zealand
are filtering in to better bids for risk related currencies,
Canada included," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
 On Tuesday, the Canadian currency touched a low of C$1.0182
to the U.S. dollar, or 98.21 U.S. cents, the biggest one-day
drop for the Canadian dollar since late January.
 "The Canadian dollar was derailed yesterday by global
factors. The influences from a domestic perspective are on
balance quite positive," Spitz added, referring to Bank of
Canada Governor Mark Carney's address to the House of Commons
on Tuesday.
 However, Carney said he would not hesitate to take steps to
slow the Canadian dollar's rise if it became clear that market
speculators were pushing it to unrealistic levels.
[ID:nN27119998]
 "Normally that would be to the detriment of a currency but
we're not seeing that this morning. It's unlikely to happen but
he doesn't want to completely rule it out from a market
perspective."
 At 8:09 a.m. (1209 GMT), the Canadian currency was at
C$1.0130 to the U.S. dollar or 98.71 U.S. cents, up from
Tuesday's finish at C$1.0176 to the U.S. dollar, or 98.27 U.S.
cents.
 Spitz said support and resistance levels for the Canadian
currency are currently holding between C$0.9930 and C$1.0214.
 "Despite the noise yesterday in the global markets, the
Canadian dollar continued to trade within that range. So once
again, I still see this consolidation in and around parity as
continuing to hold steady for the Canadian dollar."
 Currency markets will also be focused on an interest rate
decision by the U.S. Federal Reserve later in the day.
 The Fed is expected to hold interest rates near zero and
repeat its vow of an extended period of very low rates as the
Federal Reserve Open Market Committee concludes a two-day
policy meeting. The statement is expected around 2:15 p.m. EDT
(1815 GMT). For details, see [ID:nN2298630]
 "The possibility that the Fed statement this afternoon
while signaling no change in policy rates would potentially
provide an upgrade to the economic assessment which would on
balance be better for Canada as well," said Spitz.
 The two-year Canadian government bond CA2YT=RR was down
half a Canadian cent at C$99.245 to yield 1.918 percent, while
the 10-year bond CA10YT=RR dropped 8 Canadian cents to
C$100.980 to yield 3.623 percent.
  (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)