December 9, 2009 / 10:12 PM / in 11 years

CANADA FX DEBT-C$ bounces higher as debt fears wane

 * Canadian dollar finishes at C$1.0545 to the greenback
 * Bonds prices drift lower after weak U.S. auction
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Dec 9 (Reuters) - The Canadian dollar rose against
the U.S. currency on Wednesday as appetite for risk returned on
the notion that Tuesday's big drop on debt fears in Greece and
Dubai and the Bank of Canada's interest-rate stance had been
  "Generally the view here is Canada is oversold. The U.S.
dollar bounce did not treat Canada kindly," said Firas Askari,
head of foreign exchange trading at BMO Capital Markets.
 Prices for gold, a major Canadian commodity, also moved off
early lows, stiffening the Canadian dollar's spine and helping
Toronto stocks bounce back from a 100-point-plus loss and
finish slightly higher on the day. [.N] [.TO]
 But oil, another key Canadian export, sank more than 2
percent to below $71 a barrel on data that showed
larger-than-expected U.S. supply builds, fueling concerns about
weak demand. [O/R]
  "If you look at fundamentals, oil is down and basically
the equity market is flat. There is no real direction," said
Matthew Strauss, senior currency strategist RBC Capital
 "It looks much more like intraday flows and technical
breaks, momentum, rather than underlying fundamentals driving
the currency."
 Wednesday's rise followed a drop on Tuesday when global
debt concerns rattled markets. Credit agency Fitch cut Greece's
credit rating as worries about Dubai's debt woes resurfaced,
keeping the U.S. dollar buoyant as a safe haven. [FRX/]
 The Bank of Canada's reiteration on Tuesday that it would
leave its benchmark interest rate unchanged until mid 2010 also
disappointed some in the market after some recent bullish
economic data. [ID:nN08193566]
   The Canadian dollar finished at C$1.0545 to the U.S.
dollar, or 94.83 U.S. cents, up from Tuesday's finish at
C$1.0639 to the U.S. dollar, or 93.99 U.S. cents. It rose as
high as C$1.0516 to the U.S. dollar, or 95.09 U.S. cents.
 Canadian bond prices edged lower after rising the previous
day on flight-to-safety bids, while also tracking U.S.
Treasuries, which sagged on Wednesday on supply concerns after
a weak 10-year debt auction. [US/]
 "The buying support wasn't as strong as expected so dealers
are sitting on inventory they couldn't sell," said Sheldon
Dong, fixed income analyst, TD Waterhouse Private Investment.
 "It's pretty much a U.S. story."
 The Bank of Canada said on Wednesday its C$3.2 billion
auction of 1.75 percent Government of Canada bonds due March 1,
2013, produced an average yield of 1.937 percent.
 The two-year Canadian government bond CA2YT=RR ticked 1
Canadian cent lower to C$100.09 to yield 1.206 percent. The
10-year bond CA10YT=RR sank 47 Canadian cents to C$117.38 to
yield 3.957 percent.
 Canadian bonds mostly outperformed U.S. Treasuries across
the curve. The Canadian two-year bond was 46 basis points above
the comparable U.S. 2-year yield, compared with about 48 basis
points above on Tuesday.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)

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