April 2, 2009 / 8:26 PM / 11 years ago

CANADA FX DEBT-C$ higher on G20 developments, oil's rally

 * C$ gets brief boost above 81 U.S. cents
 * G20 deal to fight economic crisis, helps spur gains
 * Bonds lower across the curve
 (Updates figures to close)
 TORONTO, April 2 (Reuters) - Appeal for riskier assets
spurred by optimism from the G20 summit in London helped push
the Canadian dollar to its highest level against the U.S.
dollar in nearly a week on Thursday.
 Underpinning the currency's surge was a rally in global
equity markets and a sharp retreat in the greenback as leaders
from the 20 high-income and developing countries agreed a $1.1
trillion deal to combat the deepest economic downturn since the
Great Depression, while also vowing to tighten financial rules
to stop it from happening again. [ID:nL1230573]
 "It's about confidence," said Patricia Croft, chief
economist at RBC Global Asset Management. "Markets are
embracing risk, at least for now."
 The Canadian dollar finished at C$1.2409 to the U.S.
dollar, or 80.59 U.S. cents, up from Wednesday's close of
C$1.2610 to the U.S. dollar, or 79.30 U.S. cents.
 Earlier, it had rallied as high as C$1.2339 to the U.S.
dollar, or 81.04 U.S. cents.
 "There is a lot of optimism in the market right now in
terms of some of the announcements coming out of the G20
meeting," said George Davis, chief technical strategist at RBC
Capital Markets.
 "Markets are very hopeful that global measures taken are
going to help revive the global economic system so that's been
taken in a positive stride."
 Davis said part of the currency's gain versus its U.S.
counterpart was stop-loss driven as the greenback's fall below
C$1.2433 caught investors off guard.
 Another boost came from the relaxation of mark-to-market
accounting rules in the United States, which Davis said helped
underpin sentiment as it should help the balance sheets of
financial companies. [ID:nWEN6801]
 "Whenever equity markets rally and risk aversion moves
lower that has generally been an environment that has been
bearish for the U.S. dollar," said Davis. "So we've seen the
U.S. dollar under pressure across the board."
 Croft added the Canadian unit was helped as the price of
oil CLc1, a key Canadian export, shot up more than 9 percent
as G20 deals boosted equity markets. [ID:nT180356]
 Looking ahead, markets will be firmly focused on U.S. jobs
figures due on Friday. Forecasters polled by Reuters expect
nonfarm payrolls to register a decline of 650,000 for March.
 Canadian government bond prices were lower across the curve
as optimism about a recovery prompted investors to shift money
out of safe havens and into riskier equity markets.
 "Bond markets are perhaps pricing in a little bit of that
expectation that although the economic numbers are still pretty
bad they're not as bad," said Croft.
 The two-year bond fell 9 Canadian cents to C$100.29 to
yield 1.113 percent. The 10-year bond retreated 80 Canadian
cents to C$107.80 to yield 2.858 percent.
 The 30-year bond pulled back C$1.35 to C$124.30 to yield
3.617 percent. The U.S. 30-year bond yielded 3.5794 percent.
 Canadian government bonds outperformed across much of the
curve with the spread between the Canadian and U.S. 30-year
bond yields narrowing to 3.10 basis points, from 5.20 basis
points at Wednesday's close.
 (Reporting by Jennifer Kwan and Frank Pingue)

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