*C$ at C$1.0130 or 98.71 U.S. cents
*Bonds prices down across the curve
By Claire Sibonney
TORONTO, April 28 (Reuters) - The Canadian dollar recovered some lost ground against its U.S. counterpart on Wednesday, a day after falling 1-1/2 cents as downgrades of Greek and Portuguese debt spurred investors to flee riskier assets.
A day after ratings agency Standard & Poor's downgraded Greek government debt to "junk" status, sovereign risk contagion in the euro zone knocked global stocks hard and pushed the euro to a one-year low against the dollar.
But on Wednesday a rise in U.S. stock index futures following the previous day's steep sell-off gave relief to investors of some other riskier assets, such as the Canadian dollar. [.N]
"This morning we're seeing a more muted approach, certainly from a North American equities perspective. That, along with better data that's being seen out of Australia and New Zealand are filtering in to better bids for risk related currencies, Canada included," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
On Tuesday, the Canadian currency touched a low of C$1.0182 to the U.S. dollar, or 98.21 U.S. cents, the biggest one-day drop for the Canadian dollar since late January.
"The Canadian dollar was derailed yesterday by global factors. The influences from a domestic perspective are on balance quite positive," Spitz added, referring to Bank of Canada Governor Mark Carney's address to the House of Commons on Tuesday.
However, Carney said he would not hesitate to take steps to slow the Canadian dollar's rise if it became clear that market speculators were pushing it to unrealistic levels. [ID:nN27119998]
"Normally that would be to the detriment of a currency but we're not seeing that this morning. It's unlikely to happen but he doesn't want to completely rule it out from a market perspective."
At 8:09 a.m. (1209 GMT), the Canadian currency was at C$1.0130 to the U.S. dollar or 98.71 U.S. cents, up from Tuesday's finish at C$1.0176 to the U.S. dollar, or 98.27 U.S. cents.
Spitz said support and resistance levels for the Canadian currency are currently holding between C$0.9930 and C$1.0214.
"Despite the noise yesterday in the global markets, the Canadian dollar continued to trade within that range. So once again, I still see this consolidation in and around parity as continuing to hold steady for the Canadian dollar."
Currency markets will also be focused on an interest rate decision by the U.S. Federal Reserve later in the day.
The Fed is expected to hold interest rates near zero and repeat its vow of an extended period of very low rates as the Federal Reserve Open Market Committee concludes a two-day policy meeting. The statement is expected around 2:15 p.m. EDT (1815 GMT). For details, see [ID:nN2298630]
"The possibility that the Fed statement this afternoon while signaling no change in policy rates would potentially provide an upgrade to the economic assessment which would on balance be better for Canada as well," said Spitz.
The two-year Canadian government bond CA2YT=RR was down half a Canadian cent at C$99.245 to yield 1.918 percent, while the 10-year bond CA10YT=RR dropped 8 Canadian cents to C$100.980 to yield 3.623 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
