April 22, 2009 / 3:49 PM / 9 years ago

CANADA FX DEBT-C$ turns higher as equities rebound

* Canadian dollar rises to 80.95 U.S. cents

* Bond prices mixed across the curve

* Market focus on Thursday’s Monetary Policy Report (Adds details, quote)

By Jennifer Kwan

TORONTO, April 22 (Reuters) - The Canadian dollar shot higher on Wednesday morning as North American equity markets rebounded and oil prices steadied.

The currency, which earlier touched a low of C$1.2477 to the U.S. dollar, or 80.15 U.S. cents, pushed higher as the price of oil CLc1 trimmed losses and held around $48 a barrel.

“The risk averse sentiment has subsided and that has resulted in us moving back into commodity-based currencies,” said Matthew Strauss, senior currency strategist RBC Capital Markets.

After a tentative start to the session, the resource-heavy Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE jumped more than 1 percent higher on energy and gold issues, while rebounding financials also lent support.

U.S. markets also bounced back on strength in big manufacturers, including Caterpillar (CAT.N) and Boeing (BA.N), while techs rose ahead of Apple’s (AAPL.O) results, scheduled for release after the close.

At 10:52 a.m. (1452 GMT), the Canadian dollar was at C$1.2354 to the U.S. dollar, or 80.95 U.S. cents, up from Tuesday’s finish at C$1.2363 to the U.S. dollar, or 80.89 U.S. cents.

Wednesday’s moves mirrored Tuesday’s action when the currency rebounded in tandem with equity markets. It had earlier touched a three-week low after the Bank of Canada cut its key overnight rate to a historic low of 0.25 percent and predicted a deeper recession than previously forecast. [ID:nN21297335] [ID:nN21480852]

“The market is going to basically be watching equities again today. We’ll be definitely keeping an eye on the risk trade,” said Steve Butler, director of foreign exchange trading Scotia Capital.

Butler added the market will pay close attention to the central bank’s Monetary Policy Report, due on Thursday, in which it will outline a framework for potential unconventional measures, such as printing money to buy securities.

“We don’t know if we’ll actually see it or not,” said Butler. “The fact they are laying it out and they were so dovish yesterday, I think, indicates they still are quite concerned about the health of the Canadian economy.”

BONDS MIXED

Bond prices were mixed with the short end flat and the long end slightly lower following the Bank of Canada’s rate announcement on Tuesday.

“It’s a continuation of yesterday’s curve steepening activity,” said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment. “It’s an adjustment phase the yield curve is going through right now.”

Dong added the market was also “trading in sympathy” with the bigger U.S. market, where bond prices eased as stocks turned positive. [ID:nNYD000479]

The two-year Canada bond was up 3 Canadian cents at C$100.49 to yield 1.014 percent, while the 10-year bond fell 48 Canadian cents to C$106.85 to yield 2.960 percent.

The 30-year bond pulled back 75 Canadian cents to C$121.85 to yield 3.737 percent. In the United States, the 30-year treasury yielded 3.8027 percent. (Reporting by Jennifer Kwan; editing by Rob Wilson)

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