CANADA FX DEBT-C$ has biggest gain of 2012 on China growth talk
* C$ ends at C$0.9945 vs US$, or $1.0055 * Biggest daily C$ gain since Nov * China data talk boosts risk sentiment * Fed, ECB signal possible stimulus moves * Bond prices mostly lower By Jon Cook TORONTO, April 12 (Reuters) - The Canadian dollar had its biggest daily jump against its U.S. counterpart this year on Thursday as equity markets surged on talk of higher growth in China, signs of improvement in Europe's debt crisis and hope for further easing by major central banks. Shares in North America and Europe rose more than 1 percent as Italian and Spanish bond yields fell and traders cited talk that China on Friday may report data that will top forecasts for first-quarter growth of 8.3 percent. "Obviously if that were to happen it would be very positive for risky assets and the Canadian dollar," said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York. Hopes that China can avoid a hard landing were supported by data that showed China's bank lending spiked to 1.01 trillion yuan ($160.1 billion) in March, a sign of fresh traction in Beijing's efforts to boost credit creation. That helped underpin a move higher by commodity-linked currencies, which had weakened recently on signs of a cooling in the Chinese and U.S. economies and an escalation of Europe's lingering debt crisis. Both the Canadian and Australian dollars were big gainers against the greenback. The Canadian dollar finished at C$0.9945 versus the U.S. dollar, or $1.0055, up nearly 1 cent from Wednesday's close at C$1.0042 versus the U.S. dollar, or 99.58 U.S. cents. It was its biggest daily increase since Nov. 30. The currency shrugged off soft U.S. data that showed an unexpected rise in weekly jobless claims that came in the wake of last week's disappointing March employment report, increasing doubts about the American economic recovery. However, St-Arnaud cautioned that the Easter holiday likely contributed to the spike in U.S. claims. The numbers followed comments by the Fed's Janet Yellen on Wednesday who left the door open to further stimulus action if needed. European Central Bank Executive Board member Benoit Coeure also said further ECB bond buying is an option as concern mounted over rising bond yields in Italy and Spain. Data from Canada on Thursday offered little direction for the Canadian dollar. A Statistics Canada report that revealed a far smaller than expected trade surplus was muted by a rise in February housing prices. "The Canadian dollar overall is quite stable," said Darcy Browne, a managing director of foreign exchange trading at CIBC World Markets. "It's traded within 1 percent on either side of parity for two months now." One of the scenarios that could drive the Canadian dollar out of its recent narrow range would be a shift in expectations on the timing of the next rate move by the Bank of Canada. Strong Canadian housing data and a jump in employment in March have economists predicting the central bank may raise its key lending rate, now at 1 percent, well ahead of the Fed, which has said it intends to keep rates near zero until late 2014. The median forecast in a Reuters poll of 40 economists and strategists shows the next interest rate hike will come in the second quarter of 2013. "The main argument for the rate hike is centered around what's going on in the housing market and household debt in Canada," said St-Arnaud, who was the lone participant to predict a rate bump as soon as next quarter. The high housing prices, combined with extremely low interest rates, have tempted Canadians to take on record levels of debt. Bank of Canada Governor Mark Carney has called it the single biggest domestic risk to the economy. "The bank could hike now mainly to force a change of behavior on the side of consumers," St-Arnaud added. However, none of the respondents saw a change in rates at the next Bank of Canada policy announcement date, April 17. Canadian government bond prices were mostly lower, with Canada's two-year bond edging down 2 Canadian cents to yield 1.235 percent. The 10-year bond fell 29 Canadian cents to yield 2.049 percent.
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