October 5, 2010 / 2:16 PM / in 10 years

CANADA FX DEBT-C$ moves higher after Bank of Japan pledge

 * C$ touches high of 98.31 U.S. cents
 * US$ slides on belief Fed will ease monetary policy
 * Bond prices flat across curve
 (Adds details, adds quote)
 By Jennifer Kwan
 TORONTO, Oct 5 (Reuters) - Canada's dollar climbed against
the U.S. currency on Tuesday after the Bank of Japan surprised
markets by taking steps to ease credit to bolster economic
recovery, stoking speculation that the U.S. Federal Reserve
would follow.
 The Bank of Japan pledged to pump more funds into the
struggling economy and keep rates almost at zero, pushing the
yen lower and world stocks higher. Australia also surprised
markets by refraining from a rate hike. [MKTS/GLOB]
 Those central bank moves added to the growing belief that
the Fed will ease monetary policy further, which helped to send
the greenback to an 8-1/2 month low against a basket of
currencies on Tuesday. [FRX/]
 "The market has shifted from no longer looking at whether
the Fed is going to introduce quantitative easing, but more
looking at now what it will look like," said Camilla Sutton,
chief currency strategist at Scotia Capital.
 "It's just a question of how much and how it will be
 At 9:53 a.m. (1353 GMT), the Canadian currency CAD=D4 was
at C$1.0189 to the U.S. dollar, or 98.15 U.S. cents, after
earlier rising as high as C$1.0172, or 98.31 U.S. cents, its
highest level since Aug. 6.
 On Monday, the currency closed at C$1.0220 to the U.S.
dollar, or 97.85 U.S. cents.
 Also supporting the Canadian dollar was the price of oil
CLc1, a key Canadian export, which rose above $82 a barrel,
while gold prices XAU= touched a record above $1,330.90 an
ounce.  [O/R] [GOL/]
 "Risk appetite is increasing, which has helped commodities
with oil over $82 and gold at a new high. Equities are higher
as well. All that is factoring into a weaker U.S. dollar and a
stronger CAD," Sutton said.
 Canadian government bond prices were largely flat, with the
two-year bond CA2YT=RR up 1 Canadian cent to yield 1.357
percent, while the 10-year bond CA10YT=RR ticked 4 Canadian
cents higher to yield 2.748 percent.
 (Editing by Peter Galloway)

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