February 9, 2012 / 9:28 PM / in 6 years

CANADA FX DEBT-C$ ends stronger after hitting 2012 high on Greece

(Adds analyst comment. Updates to close)

* C$ hits 2012 high before easing back

* Supported by news Greek deal has been reached

* Shrugs off domestic Dec home prices data

* Bond yields hit 2012 highs

By Andrea Hopkins

TORONTO, Feb 9 (Reuters) - Canada’s dollar strengthened to a 2012 high against its U.S. counterpart on Thursday on firmer oil prices and as investors sought riskier assets on news of a Greek bailout package, but gains were curbed by lingering fears of a default.

News that Greek leaders had clinched a long-stalled deal just hours before a key meeting with the country’s financial backers encouraged investors to take on some risk, driving down prices of safe-haven U.S. Treasuries.

Oil rallied more than 1 percent and global stocks gained on the agreement, which is crucial for Greece to secure a 130 billion euro ($172 billion) bailout from the European Union and the International Monetary Fund. But risk assets eased back later in the day amid questions on whether the deal will be enough to avoid a messy default.

“We’re really waiting to see if stocks and commodity currencies, whether we’re going to get a further instance of this risk-on trade that has been quite powerful for much of this year so far,” said David Watt, senior currency strategist at Royal Bank of Canada.

The Canadian dollar rose as high as C$0.9925 to the U.S. currency, or $1.0076, in early trade before easing back a bit to close the day at C$0.9956, or $1.0044, up slightly from Wednesday’s close at C$0.9961 to the U.S. dollar, or $1.0039. The day’s peak was the currency’s highest level since Oct. 31.

“We’re really watching that C$0.9950 level,” said Watt. “We broke the 200-day moving average the other day which is providing that backstop now at C$0.9971, but haven’t yet closed through that C$0.9950 level.”

The currency also drew support from firmer oil prices, a key Canadian export. Oil futures gained on news of the Greek deal and as data showed U.S. weekly jobless claims dipped.

The currency showed little reaction to domestic home prices data, which showed the pace of growth in new home prices slowed in December compared to the previous month in a sign the hot housing market may be cooling.

BOND YIELDS HIT 2012 HIGHS

Canadian government bond prices were lower, following moves in the U.S. Treasury market that added to earlier losses as the jobs data hinted at further improvement in the labor market, denting the appeal of safe-haven government bonds.

The two-year bond slipped 3 Canadian cents to yield 1.093 percent. The 10-year bond fell 28 Canadian cents to yield 2.097 percent. The yield briefly touched a 2012 high of 2.135. The 30-year yield also hit a year-to-date high of 2.708 percent. (Additional reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)

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