CANADA FX DEBT-C$ stronger; hope for Europe helps risk appetite

Fri Sep 16, 2011 4:40pm EDT
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 * C$ climbs to C$0.9790 vs US$, or $1.0215
 * C$ touches two-week high against greenback
 * Bond prices mixed
 By Andrea Hopkins
 TORONTO, Sept 16 (Reuters) - The Canadian dollar
strengthened to touch its highest point against the greenback
in two weeks on Friday, as investor appetite for risk stretched
into a fourth day, helped by less pessimism over Europe.
 Global equities rose but the euro slid as hope Europe was
finally getting a grip on the region's debt crisis was offset
by lingering fears that Greece is still at risk of default.
 Gains in global equity markets suggested risk aversion has
dissipated, but a sharp decline in French and Italian banking
stocks, along with the euro's slide, indicated caution lingers
despite encouraging efforts to resolve the debt crisis.
 "We're capping off a decent week of risk appetite.
Dollar-Canada had been quietly rangebound despite the positive
risk backdrop and I think we just saw a little late-week,
late-afternoon follow through and strength in the Canadian
dollar that was long overdue," said Matt Perrier, director of
foreign exchange sales at BMO Capital Markets.
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9790 to the U.S. dollar, or $1.0215 U.S. cents,
up from Thursday's North American finish at C$0.9840 to the
U.S. dollar, or $1.0163 U.S. cents.
 The stronger close capped a week in which the Canadian
currency weakened below parity against the U.S. dollar for the
first time since Aug. 9 as fears over Europe's debt crisis
shook markets, sending investors to the relative safety and
liquidity of the U.S. dollar.
 The stronger weekly close could bode well for more gains
early next week, Perrier said.
 "(We have) made a higher high and lower low and closed
below the previous week's low. On a purely technical basis that
would suggest we could see Canada strengthen further into the
start of next week and this risk rally that we've seen over the
last four days in equities continue," he said.
 "Having said that, we've been trading from headline to
headline, and it is not inconceivable that one headline could
push us back into risk aversion mode."
 The crisis in Europe has driven market sentiment in the
last week, overshadowing any economic data.
 A U.S. report showed consumer sentiment rose in early
September, but Americans remained very gloomy about the future
with their expectations for the economy falling to the lowest
level since 1980. [ID:nS1E78F0HJ]
 In Canada, a report showed foreigners bought a record
amount of Canadian treasury bills in July as the U.S. debt
ceiling negotiations and European sovereign debt crisis shook
investor confidence. [ID:nS1E78F04I]
 Analysts said this showed Canadian assets can benefit from
safe-haven flows in uncertain markets, a factor which should
help support the Canadian dollar over time.
 Next week, Canadian inflation data to be released on
Wednesday is expected to show a moderation in consumer prices
in August, confirming a lack of inflationary pressure.
 Canadian bond prices were mixed.
 The two-year bond CA2YT=RR was off 8 Canadian cents to
yield 1.064 percent, while the 10-year bond CA10YT=RR was up
3 Canadian cents to yield 2.292 percent.
 (Additional reporting by Claire Sibonney; Editing by Jeffrey