* C$ rises to 95.76 U.S. cents
* Reports say China exports up 50 percent
* Bond prices weaken as safely bid unwinds
* Five-year bond auction sees soft demand
By Claire Sibonney and Jeffrey Hodgson
TORONTO, June 9 (Reuters) - Canada's dollar strengthened against the U.S. currency on Wednesday, fueled by news of stronger than expected Chinese exports, which raised hopes for global growth and boosted resource prices.
"It's all been a slight return to risk appetite, that's pretty much the biggest factor driving everything and comes back to ... Chinese exports," said Jon Gencher, a director of foreign exchange sales at BMO Capital Markets.
"Oil is up, commodities are doing okay. So, all in all, it's risk-on. But with that said the market is still going to remain very cautious."
As Canada is a major exporter of oil and other commodities, improving prospects for global growth often boost the currency.
The Canadian dollar closed at C$1.0443 to the U.S. dollar, or 95.76 U.S. cents, up from Tuesday's North American finish of C$1.0485 to the U.S. dollar, or 95.37 U.S. cents.
The currency firmed as high as C$1.0365 to the U.S. dollar, or 96.48 U.S. cents, its strongest level since June 4, but pared gains as North America stock markets dropped into negative territory late in the session. [.TO][.N]
Chinese exports in May grew about 50 percent from a year earlier, a senior government official told an internal investor conference on Wednesday, sources at the meeting told Reuters. The data is due out on Thursday. [ID:nBJD003776]
"The expectation was for 30 percent and that generally is giving a bid to riskier assets and riskier currencies, and cyclical currencies," said Adam Cole, head currency strategist at RBC Capital Markets in London.
Against the euro, the Canadian dollar firmed below C$1.25, or 80 euro cents, to its highest levels since October 2000 against the European currency.
Currency traders are now looking ahead to a speech and press conference by Bank of Canada Governor Mark Carney in Montreal in which he may offer clues on whether the central bank will raise rates further next month.
CANADIAN BOND AUCTION SOFT
Canadian bond prices edged lower across the curve, as the early rise in risk appetite cooled bids from investors seeking traditional safe-haven assets.
As a result, Canada's auction of five-year bonds met with more tepid demand than usual, producing the weakest bid-to-cover ratio for a five-year auction since May 2009. [CA/AUC]
The two-year government bond CA2YT=RR fell 10 Canadian cents to yield 1.722 percent, while the 10-year bond CA10YT=RR fell 24 Canadian cents to yield 3.351 percent.
Canadian bonds underperformed U.S. issues across the yield curve, with the 10-year Canadian yield rising to 17.1 basis points above its U.S. counterpart from 13.4 basis points on Tuesday.
"It's just reflecting that the global risk picture looks much better and, in that environment, Canada will continue to outperform as an economy and would probably mean we have to deal with higher interest rates," said Tom Nakamura, fixed-income portfolio manager at AGF Investments.