CANADA FX DEBT-C$ firms as ECB moves sharpen risk appetite

Thu Jun 5, 2014 4:32pm EDT

* Canadian dollar at C$1.0929 or 91.50 U.S. cents
    * Bond prices mostly higher across the maturity curve

 (Adds details, quotes; updates prices)
    By Leah Schnurr
    TORONTO, June 5 (Reuters) - The Canadian dollar rose
modestly against the greenback on Thursday, boosted by an
increase in investor risk appetite after the European Central
Bank announced a rate cut as well as further actions to boost
the euro zone economy.
    The Canadian currency remained within its recent trading
range, however, as investors turned their attention to Friday's
key jobs report for May.
    The loonie also reversed earlier gains against the euro
after the ECB cut interest rates and launched a series of
measures to boost liquidity.
    The ECB stopped short of quantitative easing, such as the
Federal Reserve has done, but said it was preparing to purchase
asset-backed securities in the future. The euro 
recouped earlier losses to trade higher against the Canadian
dollar and was last up at C$1.4919. 
    While the ECB's moves translated into improved risk
sentiment and demand for the Canadian dollar against the
greenback, the lift was likely to be temporary, said Rahim
Madhavji, president at KnightsbridgeFX.com in Toronto.
    "At the end of the day, I think the Canadian dollar is still
quite rangebound," Madhavji said.
    The Canadian dollar ended the North American
session at C$1.0929 to the greenback, or 91.50 U.S. cents,
slightly stronger than Wednesday's close of C$1.0939, or 91.42
U.S. cents.
    Canadian economic data had little impact on the loonie as
the value of building permits rose in April, but fell short of
expectations. 
    Separate data that showed the pace of purchasing activity in
Canada unexpectedly contracted last month briefly weakened the
loonie, but the currency was ultimately able to push higher.
 
    The monthly jobs report will be the main focus on Friday,
with economists expecting the economy to have added 25,000 jobs
in May after unexpectedly shedding jobs the month before.
    The dovish tone from the Bank of Canada in their policy
statement on Wednesday has removed one potential catalyst for
the loonie to rise in the near term, according to Madhavji. 
    "The Bank of Canada has really taken out the catalyst for
upside for the loonie, but I think the downside is still there,
especially if the jobs data comes out negative. We could see a
pretty sharp selloff in the loonie based on what the Bank of
Canada has set up going into tomorrow," he said.
   Canadian government bond prices were mostly higher across the
maturity curve, though the two-year was unchanged to
yield 1.064 percent, while the benchmark 10-year bond
 was up 18 Canadian cents to yield 2.331 percent.

 (Editing by G Crosse)
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