June 21, 2010 / 12:12 PM / 10 years ago

CANADA FX DEBT-C$ soars to 5-week high on China move

   * 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
 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.
 "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)

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