CANADA FX DEBT-C$ quietly hits two-month high as investors seek risk

* C$ at C$1.0107 vs US$, or 98.94 U.S. cents
    * Loonie follows lead of Aussie, Kiwi after Japan stimulus
    * Chinese economic data shows signs of recovery

    By Alastair Sharp
    TORONTO, April 11 (Reuters) - The Canadian dollar firmed a
third of a cent against the U.S. dollar on Thursday, touching
its strongest level in nearly two months, lifted by signs of a
growing Chinese recovery and Japan's aggressive monetary policy
    The strength came early in the session and mostly held
through the day, following the lead of fellow commodity-linked,
and higher-yielding, currencies in Australia and New Zealand. 
    "It's just a little bit of catch-up on the Canadian dollar
front. Aussie and Kiwi had been bid up quite nicely yesterday,"
said Matt Perrier, managing director of foreign exchange sales
at BMO Capital Markets.
    It has been a case of gradual strengthening for the loonie,
as Canada's currency is colloquially known, after it fell
earlier in the year on a string of weak economic data that
forced the country's central bank to soften its rate-hike bias.
    "Since we've been coming off the weakest points for the
Canadian dollar back in February, we've been slowly notching in
lower highs on any Canadian dollar weakness," Perrier said.
    Assets that benefit from stronger growth, which typically
include the loonie, have also rallied since the Bank of Japan
unveiled a radical stimulus program a week ago.
    In addition to the Canadian dollar, the MSCI's world equity
index has hit levels last seen in June 2008.
Market sentiment has also taken the S&P 500 index of U.S.
stocks to a record high. 
    More encouragement came on Thursday from figures that showed
the number of Americans filing new unemployment benefit claims
fell more than expected last week, easing fears of a marked
deterioration in U.S. labor market conditions after a surprise
stumble in job growth in March. 
    The Canadian dollar's latest gains also have been helped by
evidence of an economic recovery in China, notably signs of
growing domestic demand and easier credit, and by indications
from the European Central Bank last week that it may cut rates.
    "It's basically a risk-asset're seeing equity
(markets) firmer as well. And there has been good correlation
between the Canadian dollar and the risk-on move," said Mark
Chandler, head of Canadian fixed income and currency strategy at
Royal Bank of Canada.
    Chandler noted Canada's fellow commodities-linked currency,
the Australian dollar, held on to gains against the U.S. dollar
despite a dismal Australian employment report.
    The Canadian dollar ended the session at C$1.0107
versus the U.S. dollar, or 98.94 U.S. cents. This was stronger
than Wednesday's North American finish of C$1.0144, or 98.58
U.S. cents.
    Earlier in the session, the currency touched C$1.0084, its
strongest level against the greenback since Feb. 18.
    The Canadian dollar's performance was mixed against other
currencies. It was outperforming the Australian dollar
 and Japanese yen, but weakened versus the
New Zealand dollar, where it touched another fresh
low dating back to mid-2005.
    The price of Canadian government debt was higher across the
curve, with the two-year bond adding more than 2
Canadian cents to yield 0.982 percent and the benchmark 10-year
bond rising 17 Canadian cents to yield 1.786