* C$ touches high of C$1.0152, or 98.50 U.S. cents
* China move to allow yuan flexibility boosts markets
* Canadian bond prices move lower across curve
By Jennifer Kwan
TORONTO, June 21 (Reuters) - The Canadian dollar zoomed to its highest level in just over five weeks against the U.S. currency on Monday after China allowed more yuan flexibility, sending global equities and some currencies sharply higher.
China's weekend announcement was seen as a signal of confidence in the country's economy. China's central bank has maintained the peg to the U.S. dollar since the middle of 2008, a controversial policy aimed at steadying the world's fastest growing major economy during the global economic downturn. For details, see [ID:nN20208975]
The announcement, just days before a Group of 20 summit in Toronto, could boost purchasing power and demand in the world's third largest economy, encouraging investors globally to buy risky assets.
"It's (U.S.) dollar negative overall and positive for commodities. You've seen base metals, copper, oil, gold all rally, which is positive for the Canadian dollar," said David Bradley, director of foreign exchange trading at Scotia Capital.
The Canadian currency touched a high of C$1.0152 to the U.S. dollar, or 98.50 U.S. cents, its strongest level since May 13. By 7:40 a.m. (1140 GMT), Canada's dollar had given up some of the gains and was at C$1.0167 to the U.S. dollar, or 98.36 U.S. cents, still comfortably higher from Friday's close at C$1.0212 to the U.S. dollar, or 97.92 U.S. cents.
World stocks hit a five-week high while the euro and commodities jumped after the China move, which is seen easing tensions with the West and boosting confidence in the global economy. U.S. stock index futures signaled a sharply higher open Monday. [MKTS/GLOB] [FRX/] [.N]
Oil prices, a key Canadian export whose price movements often influence the direction of the Canadian dollar, edged toward $79 a barrel as China's pledge raised expectations of higher demand from the world's second largest energy consumer. [O/R]
"We finally managed to push through this C$1.0200 (to the U.S. dollar) level overnight. Looks like we're on our way towards C$1.0110," said Scotia's Bradley, referring to the currency's peak on May 13.
Canadian government bond prices dropped across the curve, with moves largely mirroring U.S. Treasuries as China's yuan move bolstered risk plays. [US/]
The two-year government bond CA2YT=RR dipped 9 Canadian cents to yield 1.784 percent, while the 10-year bond CA10YT=RR fell 39 Canadian cents to yield 3.369 percent. (Reporting by Jennifer Kwan; editing by Jeffrey Benkoe)