was actually a little bit betterthan expected said Michael Gregory senior economist at

was actually a little bit betterthan expected,” said Michael Gregory, senior economist at BMOCapital Markets. “It seemed to be risk appetites were were building againthis morning but things turned around a little bit here despitethe fact that data today … Positioning ahead of those events helped reverse an earlyselloff in bonds, which came on news that CIT Group may havereached a deal that could allow it to avoid bankruptcy. That news helped initially lure investors out of governmentdebt and and into stocks, even pushing the S&P/TSX compositeindex .GSPTSE briefly to its highest level since June 15. Federal Reserve Chairman BenBernanke’s semi-annual testimony to Congress. In addition to Tuesday’s Bank of Canada rate announcement,dealers are getting set for U.S. “However, if CAD maintains its momentum, short of signs ofa stunning rebound in the global economy, the risk of astronger response will increase exponentially as USD/CAD headwell below C$1.10.” BONDS PRICES REBOUND Domestic bond prices reversed an early selloff to close thesession mostly higher as potential for bond-friendly remarksfrom central bankers convinced dealers to square positions.

[ID:nN0479627] According to RBC Capital Markets, the recent strength ofthe Canadian dollar is on the Bank of Canada’s radar screen,but it would still need to rise much further to convince thecentral bank to intervene in currency markets. “The (Bank of Canada) is likely to continue to rely onrhetoric to cap (Canadian dollar) rallies,” David Watt, seniorcurrency strategist at RBC Capital Markets, wrote in a note. [ID:nN17484031] Plenty of eyes will likely be on the bank’s accompanyingstatement to see if it offers an updated view on the Canadiandollar. In its June statement, the bank said a strong currencycould offset positive factors such as improved financialconditions and commodity prices. cents, but wasstill comfortably above Friday’s close of C$1.1161 to the U.S.dollar, or 89.60 U.S cents. Higher prices for oil and commodities, key Canadianexports, also helped lure traders to the currency.

The Canadian dollar’s rise came ahead of the Bank ofCanada’s interest rate announcement on Tuesday, when it isexpected to stick to its conditional pledge to keep rates atthe current near-zero level. “Therefore risk assets are in demand and theCanadian dollar is gaining on the back of that sentiment.” By the end of the session the Canadian dollar backed downto C$1.1068 to the U.S dollar, or 90.35 U.S. The move followed last week’s4.4 percent rise in the currency. “Problems with the economy are still prevalent but peopleare driving stocks upward with speculation that the economy isin the recovery stage,” said Tyson Wright, a senior foreignexchange trader at Custom House, a currency services firm inBritish Columbia. That all helped to send the Canadian currency as high asC$1.1019 to the U.S dollar, or 90.75 U.S cents, which markedits highest level since June 12. The rally came alongside advances in global equities, asstrong U.S.