CANADA FX DEBT-C$ firms as stocks rise; bonds prices recover

Thu May 28, 2009 9:49am EDT
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* Canadian dollar gets boost from firmer equities

* Bonds track U.S. Treasuries in recovery rally

TORONTO May 28 (Reuters) - The Canadian dollar firmed versus the U.S. dollar on Thursday, boosted by a jump in equity markets, with market players looking for a possible retest of a seven-month high hit in the previous session.

The Canadian dollar rose above 90 U.S. cents on Wednesday, marking a climb of more than 17 percent from the four-year low below 80 U.S. cents that it fell to in early March.

But a sharp selloff in stock markets on Wednesday spilled over to the Canadian dollar, which typically tracks equity markets as a barometer of risk appetite. North American stocks rallied on Thursday.

"People are still going to be focused on equity markets for direction in FX. If equity markets rally, that tends to be a positive backdrop for the Canadian dollar, and vice versa," said George Davis, chief technical analyst at RBC Capital Markets.

At 9:20 a.m. (1320 GMT), the Canadian dollar was at C$1.1179 to the U.S. dollar, or 89.45 U.S. cents, up from C$1.1195 to the U.S. dollar, or 89.33 U.S. cents, at Wednesday's close.

The price of oil neared $64 a barrel, helping to prop up the Canadian dollar. Oil is a key Canadian export and its price often influences the general direction of the country's currency.

Market chatter about Canada's ballooning fiscal deficit has not hurt the Canadian dollar. Many analysts say it is unlikely to pose a long-term threat since it is largely caused by temporary measures that are expected to unwind naturally in coming years. [ID:nN28318088]   Continued...