January 26, 2009 / 3:22 PM / in 9 years

CANADA FX DEBT-C$ rises as commodities firm; equities rise

* C$ rises 0.96 percent as flight to safety wanes

* Bond prices as TSX gains more than 1 pct; supply woes

By Jennifer Kwan

TORONTO, Jan 26 (Reuters) - The Canadian dollar shot higher against the U.S. currency on Monday, as commodity prices firmed and a rise in equity markets diminished the greenback’s safe haven appeal.

Canadian bond prices were lower across the curve as money flowed to equities, while broader concerns of swelling supply continued to weigh.

At 9:37 a.m. (1437 GMT), the Canadian dollar was at C$1.2194 to the U.S. dollar, or 82.00 U.S. cents, up from C$1.2312 to the U.S. dollar, or 81.22 U.S. cents, on Friday.

“Generally firmer commodity prices are supporting our currency,” said Sal Guatieri, senior economist at BMO Capital Markets. “As well, the tone in equity markets is a little better so we’re seeing a little less risk aversion.”

In choppy action, oil was above $47 a barrel, [ID:nSYD214552] while the price of gold rose above $900 an ounce level, lifted by interest in bullion as shelter from risk. Some base metals were also higher. [ID:nLQ181420]

Canada is a key exporter of oil and gold and the Canadian currency is often swayed by price fluctuations in commodities.

With no major economic data of note expected for release on Monday in Canada, the currency will likely track commodity prices and the U.S. dollar.

The euro and the sterling edged higher against the U.S. dollar as a rally in bank shares supported European equities, helping to ease investors’ aversion to riskier assets. [ID:nN26294416]

Markets are also looking ahead to Tuesday’s federal budget, which is expected to usher in the country’s first fiscal deficit in a decade. Late last week, a government official leaked to reporters that deficits over the next two fiscal years would total C$64 billion.

BONDS DROP

Canadian bond prices were lower as money flowed into equities with Toronto’s main stock index .GSPTSE up more than 1 percent, while broader concerns about swelling supply also pressured prices.

In recent sessions, dealers have fled U.S. bonds on concerns about the impact of the large amount of new debt that is expected to be issued in the United States in coming years to fund government programs to stimulate the economy.

The two-year bond fell 2 Canadian cents to C$102.72 to yield 1.251 percent, while the 10-year bond fell 14 Canadian cents to C$111.50 to yield 2.839 percent.

The 30-year bond retreated 10 by Canadian cents to C$123.50 to yield 3.661 percent. In the United States, the 30-year Treasury yielded 3.3424 percent.

Reporting by Jennifer Kwan; editing by Alden Bentley

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