November 29, 2011 / 1:59 PM / 9 years ago

CANADA FX DEBT-C$ climbs after Italian bond auction

 * C$ hits high of C$1.0259 vs US$, or 97.48 U.S. cents,
 * Global equities climb
 * Bond prices slip across the curve
 By Jennifer Kwan
 TORONTO, Nov 29 (Reuters) - The Canadian dollar rose
against the U.S. currency on Tuesday as the euro and global
equities moved higher after an Italian bond auction soothed
investor fears about limited demand for European debt.
 Investors were somewhat relieved by Italy's success in
selling 7.5 billion euros in bonds even if its cost of
borrowing continues to soar. [MKTS/GLOB]
 Still, Italy's borrowing costs hit a record peak of nearly
8 percent in a sign that pressure was mounting for euro zone
finance ministers to resolve the two-year old debt crisis.
 "Markets were relieved that the Italian debt auctions were
cleared insomuch as they got reasonable cover ratios. Yes the
auctions came at a price, but the fact the auctions were
covered provided a lift to risk sentiment," said Jeremy
Stretch, head of foreign exchange strategy at CIBC World
Markets in London.
 "You can say that the yield levels are ruinous, they're
unsustainable. Yes, absolutely. But I think the market was in
the short term more worried the auction was going to be
 The auction helped drive the Canadian dollar CAD=D4 to a
high of C$1.0259 against the greenback, or 97.48 U.S. cents,
but by 8:38 a.m. (1338 GMT), it retreated to C$1.0312 to the
U.S. dollar, or 96.97 U.S. cents.
 On Monday, it finished at C$1.0354 to the U.S. dollar, or
96.58 U.S. cents.
 The currency's move higher on Tuesday follows its sharp
ascent the day before as investor optimism was lifted by
renewed risk appetite following a holiday-thinned week of
 After clawing back from the C$1.05 levels breached on
Friday, Stretch said the next significant resistance levels for
the Canadian dollar are seen at C$1.0240-45 to C$1.0375-80
against the U.S. currency.
 Canadian government bond prices retreated across the curve,
following the broader trend in the United States where
Treasuries fell in part on relief Italy was able to sell debt
in volumes closer to the upper end of its target. [US/]
 The two-year bond CA2YT=RR fell 4 Canadian cents to yield
0.996 percent, while the 10-year bond CA10YT=RR sank 15
Canadian cents to yield 2.139 percent.
 (Editing by Theodore d'Afflisio)

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