May 12, 2011 / 8:02 PM / in 9 years

CANADA FX DEBT-C$ cuts losses as commodities rebound

 * C$ at C$0.9629 to the U.S. dollar, or $1.0385
 * Bond prices backtrack in bid for riskier assets
 (Recasts, updates to afternoon, adds commentary)
 By Claire Sibonney
 TORONTO, May 12 (Reuters) - The Canadian dollar pared most
of it losses against the U.S. dollar late on Thursday as a
rebound in oil and other commodities helped restore interest in
the resource-based currency.
 By the end of the day, U.S. crude oil futures ended higher
in volatile trading as the greenback's weakness offset concerns
about demand, rebounding from a 5 percent plunge in the
previous session. [O/R]
 U.S. stocks also stabilized in positive territory. [.N]
 "It's amazing, today has just been a gyration in crude,
equities and the FX market, the market seems really uncertain,"
said Firas Askari, head of foreign exchange trading at BMO
Capital Markets.
 "You've had monstrous ranges here in the currencies but the
volume hasn't been that heavy," he added, noting that traders
were hard-pressed to come up with any concrete explanations in
the dramatic moves, apart from position-squaring.
 At 3:29 p.m. (1929 GMT), the Canadian dollar CAD=D4 was
at C$0.9629 to the U.S. dollar, or $1.0385, well off the day's
lows, but still down from C$0.9611 to the U.S. dollar, or
$1.0405, at Wednesday's North American session close.
 Analysts cited a combination of factors for the broader
rebound in riskier assets, including a bounce in the euro and
signals that the White House and Congressional Republicans were
moving closer to an agreement on raising the national debt
 Askari said that uncertainty over the Bank of Canada's next
policy move is a factor weighing on the currency, as investors
eagerly await crucial inflation numbers next week. ECONCA
 The recent collapse in commodity prices has raised
questions about how high the Bank of Canada, which targets
inflation, is likely to raise interest rates over the rest of
the year. BOCWATCH
 Still, Askari noted a lot of interest from long-term asset
manager to buy Canadian dollars between C$0.9675 and C$0.9725.
 Jack Spitz, managing director of foreign exchange at
National Bank Financial said the next important resistance
level for the currency pair lies around C$0.97-C$0.9720,
followed by the 90-day moving average of C$0.9765 and a bigger
trendline at C$0.9800.
 "The market continues to be biased for an outperformance by
the Canadian dollar against the U.S. dollar," he said, noting
the domestic currency will likely need to fall back through
parity in order for the market to start thinking about
reversing its net long positions.
 Boosting the currency in recent days has been talk of
positive flows on the back of foreign acquisitions and buying
from Asian central banks.
 Finance Minister Jim Flaherty has also signaled that while
currency volatility is unwelcome, there's are advantages to
having a strong currency. [ID:nN10140882]
 Canadian bond prices retreated as they tracked their U.S.
counterparts, which were hurt by the lackluster 30-year
Treasury bond auction and renewed appetite for stocks and
commodities after recent sell-offs in riskier assets. [US/]
 Canada's two-year bond CA2YT=RR was off 1 Canadian cent
to yield 1.705 percent, while the 10-year bond CA10YT=RR fell
17 Canadian cents to yield 3.243 percent.
 (Additional reporting by Ka Yan Ng; Editing by Jeffrey

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