CANADA FX DEBT-C$ pares early losses on Greek deal hopes

Tue Feb 7, 2012 9:42am EST

* C$ at C$0.9960 to the US$, or $1.0040

* Greek debt deal progress lifts market

* Bond prices mostly lower

By Jon Cook

TORONTO, Feb 7 (Reuters) - The Canadian dollar pared losses against its U.S. counterpart on Tuesday morning and looked set to move higher after a Greek official said Athens is drafting a bailout agreement to be placed before political leaders for approval later in the day.

Greece has been in talks to come to terms on new austerity measures demanded by the European Union in return for another bailout, which needs to be approved by Feb. 15 if the money is to be available in time for Athens to meet a 14.5 billion euro ($18.96 billion) bond redemption in March.

In the absence of a signed deal, investors have been hesitant to throw their money into riskier commodity-linked currencies such as the Canadian dollar.

"We're seeing sideways trade here," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.

At 9:11 a.m. (1411 GMT), the Canadian dollar stood at C$0.9960 to the U.S. dollar, or $1.0040, little changed from Monday's finish of C$0.9955, or $1.0045.

In the absence of economic data in North America, focus was on Tuesday afternoon's U.S. Senate testimony by Federal Reserve Chairman Ben Bernanke. Last month, Bernanke announced he would keep interest rates on hold until 2015, sparking speculation there could also be another round of quantitative easing.

"We know that Mr. Bernanke has been a fan of QE and there's always talk of could there be further influences," Gavsie said.

Gavsie said he saw the Canadian dollar staying close to current levels - likely in a range between C$0.9960 and C$1.0030 - and that a push towards Monday's high of C$0.9930 would be unlikely without a Greek deal.

Canadian bond prices were mostly lower, with the two-year bond down three Canadian cents to yield 1.038 percent. The 10-year bond fell 30 Canadian cents to yield 2.007 percent.

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