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* C$ rallies as high as 84.29 U.S. cents
* Improved market sentiment drives gain
* Bond prices stuck lower across the curve (Adds details)
By Frank Pingue
TORONTO, April 30 (Reuters) - The Canadian dollar charged to its highest level in nearly four months on Thursday as improved market sentiment helped the domestic currency break through a key technical level.
Canada's currency rallied overnight as high as C$1.1864 to the U.S. dollar, or 84.29 U.S. cents, its highest level since Jan. 9, outperforming the other commodity-based currencies like the Australian and New Zealand dollars.
By 8:05 a.m. (1205 GMT), the currency retreated slightly to C$1.1899 to the U.S. dollar, or 84.04 U.S. cents, still up comfortably from C$1.2030 to the U.S. dollar, or 83.13 U.S. cents, at Wednesday's close.
The domestic currency had followed other commodity-based currencies higher on Wednesday but it was unable to strengthen past C$1.1990, 83.40 U.S. cents, despite several attempts.
"A continuation of risk appetite overnight gave the market enough reason to push through that (level) and once it broke through C$1.1990 it played catch up with Aussie dollar and as a result it outperformed overnight," said Matthew Strauss, senior currency strategist RBC Capital Markets.
"It just seems the market is looking and reacting to positive data and at the moment events or data that contradict that are simply ignored or only have a minimal impact."
Sentiment was upbeat overnight as global equities rallied as investors bet on a stabilization of the world economy and took heart from some upbeat corporate earnings.
BOND PRICES LOWER
Domestic bond prices were lower across the curve alongside the bigger U.S. Treasury market, adding to the skid during the previous session as U.S. stock index futures were pointing to a rise of more than 1 percent at the open. [ID:nN30501421]
Futures were suggesting a higher open given the rash of better-than-expected profits and the U.S. Federal Reserve's comments on Wednesday that the pace of economic deterioration in the United States appeared to be slowing. [ID:nN29410693]
"Overseas equity markets were up appreciably and U.S. stock index futures are pointing sharply higher," said Sal Guatieri, senior economist at BMO Capital Markets. "It's all on the Fed's feel-good press statement that suggests the recession may be ebbing."
At 8:30 a.m. Canadian gross domestic product figures by industry for February will be released along with reports on producer prices raw materials for March.
The two-year Canada bond was down 2 Canadian cents at C$100.53 to yield 0.991 percent, while the 10-year dropped 17 Canadian cents to C$105.50 to yield 3.110 percent.
The 30-year bond was off 30 Canadian cents at C$119.75 to yield 3.844 percent. In the United States, the 30-year Treasury yielded 4.069 percent.