CANADA FX DEBT-C$ strengthens on data, better risk appetite

Mon Jan 31, 2011 9:28am EST
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 * C$ hits high of $1.0037
 * Bonds softer across curve
 * Canada Nov GDP up 0.4 pct, beats consensus
 (Updates with details, commentary)
 By Claire Sibonney
 TORONTO, Jan 31 (Reuters) - The Canadian dollar
strengthened against the U.S. dollar on Monday after monthly
domestic growth beat expectations and fears over political
turmoil in Egypt eased somewhat.
 Data showed Canada's economy grew 0.4 percent in November
for the strongest gain since March 2010, thanks to oil and gas
extraction. Average forecasts called for a rise of 0.3 percent
after a 0.2 percent gain in October. [ID:nN31223933]
 Following the data, the currency CAD=D4 hit a session
high of C$0.9963 to its U.S. counterpart, or $1.0037, up from
C$0.9985 to the U.S. dollar, or $1.0015, heading in the
 "It highlights that at least until late fall the Canadian
economy was maintaining an upward growth trajectory and that in
terms of the Canadian dollar should be quite positive," said
Camilla Sutton, chief currency strategist at Scotia Capital.
 Other data showed higher prices for petroleum and metals
lifted Canadian producer prices and raw materials prices
slightly more than consensus in December. [ID:nN29194350]
 The Canadian dollar was already on firmer ground heading
into the data releases, returning above parity with the
greenback against a backdrop of improved global risk appetite
as the euro and U.S. equity futures moved higher.
 But Sutton said the Canadian dollar will still remain
susceptible to events in Egypt with fears that anti-government
protests there could spread among regional oil-producing
 "CAD is highly sensitive to anything that spikes risk
aversion higher and there is lots of headline risk."
 At 9:18 a.m. (1418 GMT), the currency stood at C$0.9981 to
the U.S. dollar, or $1.0019, up from Friday's North American
close at C$1.0011 to the U.S. dollar, or 99.89 U.S. cents,
which marked the Canadian dollar's first finish below parity
with the greenback in a month.
 Sutton noted the day's range for the Canadian dollar versus
the U.S. should rest between the 21-day moving average C$0.9939
and its year-to-date low of C$1.0031.
 Canadian bond prices were slightly softer across the curve,
tracking U.S. Treasuries, as investors took profits from a
flight-to-safety rally driven by mounting unrest in Egypt.
 The two-year bond CA2YT=RR was off 2 Canadian cents to
yield 1.686 percent, while the 10-year bond CA10YT=RR fell 5
Canadian cents to yield 3.252 percent.
(Reporting by Claire Sibonney, Editing by Chizu Nomiyama)