CANADA FX DEBT-C$ strengthens to near a two-month high

Tue Apr 8, 2014 4:43pm EDT

* Canadian dollar at C$1.0922 or 91.56 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quote, updates prices)
    By Leah Schnurr
    TORONTO, April 8 (Reuters) - The Canadian dollar
strengthened against the greenback on Tuesday to hit its highest
level in nearly two months, benefiting from broad risk appetite
and signs of health in recent economic data.
     A round of disappointing housing market figures on Tuesday
trimmed some of the loonie's gains but failed to break its
momentum. Housing starts in Canada fell more than expected in
March, while building permits slumped in February.
 
    "Part of it is the ability for the market to put some risk
back on today," said Amo Sahota, director at Klarity FX in San
Francisco.
    "They feel like they've been squeezed in certain places, so
we've seen some broad-based currency strength as a result of
that, and the loonie has been part of it."
    In Quebec, the federalist Liberal Party won a majority
government in provincial elections, eliminating the threat of an
impending referendum on independence from Canada. 
    The election result reassured investors, though the runup to
Monday's vote had not had much impact on the currency.
 
    Since touching a 4-1/2 year low in late March, the loonie
has bounced higher. A robust employment report last week
propelled it through the C$1.10 level, which had represented
significant resistance. On Tuesday, the loonie hit a session
high of C$1.0912, its highest level since mid-February.
    "It's playing a reverse role from what it was doing several
weeks ago when no matter what happened, if it had an opportunity
to weaken out, it would weaken," Sahota said. "Now it seems like
if it has the opportunity to strengthen, it's taking the bull by
the horns."
    The Canadian dollar ended the North American
session at C$1.0922 to the greenback, or 91.56 U.S. cents,
stronger than Monday's close of C$1.0969, or 91.17 U.S. cents. 
    The currency is likely to see further gains heading into the
Bank of Canada's policy announcement on April 16 and potentially
in the weeks after, said Greg Moore, senior currency strategist
at Royal Bank of Canada in Toronto.
    "In the next couple weeks, we could probably dip down into
the C$1.08 area," he said.    
    "Broadly speaking, we're looking at the low C$1.09s to
C$1.12 sideways trend to continue for the next few months."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 0.2 Canadian
cents to yield 1.081 percent and the benchmark 10-year
 up 1 Canadian cent to yield 2.462 percent.

 (Editing by Peter Galloway)
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