CANADA FX DEBT-C$ picks up on China, euro zone data

Mon Dec 3, 2012 8:14am EST

* C$ edges up to C$0.9921 vs US$, or $1.0080
    * Bond prices ease across the curve

    By Claire Sibonney
    TORONTO, Dec 3 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Monday as signs of economic
growth in China and a slower contraction in Europe lifted demand
for riskier assets, but caution over the U.S. budget crisis
limited gains.
    The currency advanced alongside stocks and commodities after
the latest readings from both official and private sector
surveys of China's vast manufacturing sector showed activity
picked up November, adding to evidence the economy is reviving
after seven quarters of slowing growth. 
    Meanwhile, final readings of the euro zone's Manufacturing
Purchasing Managers Index (PMI) for November showed factory
activity declining at a slower rate, though this still leaves
the region on course for its worst quarter since early 2009.
    Signs Greece was making progress in making its debt
sustainable also boosted confidence, pushing the euro to a
six-week high against the U.S. dollar. 
    "I think it's really a move which is being led by
euro/dollar and it's just spilling over into dollar direction
generally," said Adam Cole, global head of FX strategy at RBC
Capital Markets in London.
    At 8 a.m. (1300 GMT), the Canadian currency stood
around C$0.9921 versus the greenback, or $1.0080, compared to
Friday's North American session close at C$0.9936, or $1.0064,
capping off a 0.7 percent gain for the month of November.
    "The (U.S.) dollar is lower against most of the majors
overnight rather than being anything specific to Canada. There
is plenty going on in Canada this week but not so much today
really."
    Investors will be watching the Bank of Canada's interest
rate announcement on Tuesday for any shift in its long-held
tightening bias. The central bank is expected to hold off
raising interest rates until the fourth quarter of 2013 but will
continue to talk about a future hike when it sets policy, a
Reuters poll of market forecasters found. 
    Markets are also still cautious about the budget impasse in
Washington. U.S. Treasury Secretary Timothy Geithner pushed
Republicans on Sunday to offer specific ideas to cut the
deficit, and predicted that they would agree to raise tax rates
on the rich to obtain a year-end deal and avoid a possible
recession. 
    On Monday, U.S. manufacturing data due at 10 a.m. is
expected to drive further direction.
   Canadian bond prices eased across the curve. The two-year
bond was off 3 Canadian cents to yield 1.085 percent,
while the benchmark 10-year bond lost 27 Canadian
cents to yield 1.729 percent.
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