C$ picks up on hope for Greek vote

TORONTO: The Canadian dollar firmed against its US counterpart on Monday, recovering from a four-and-a-half month low hit in the previous session as Greek polls showed growing support for pro-bailout parties.

Global share markets, commodities and the euro were all recovering from steep falls last week, when investors fled to the safety of the US dollar on mounting concerns about Greece, Spain's banking sector, and a lack of immediate policy responses from European leaders.

Greek opinion polls pointed to victory for the conservative New Democracy party in the June 17 election, making it more likely the next Greek government will stick to bailout terms agreed with the European Union and the International Monetary Fund, enabling Greece to stay in the euro.

"The market has decided to stop catastrophizing Greece ... and the market is taking that as a catalyst perhaps to start pulling back on its extreme long (US) dollar positioning," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

Ho noted however that trading was subdued by the long US holiday weekend with US financial markets closed on Monday for the Memorial Day holiday.

At 8:03 a.m. (1203 GMT), the Canadian dollar stood at C$1.0241 versus the US dollar, or 97.65 US cents, stronger than Friday's North American session close at C$1.0295 against the US dollar, or 97.13 US cents.

Later in the week, US employment and housing data, domestic growth numbers and an Irish vote on the European Union's new fiscal treaty will drive further direction for risk sentiment.

End-of-month portfolio rebalancing may also affect currency markets with US dollar buying on the back of weaker equity performance globally.

Spitz said he doesn't expect the Canadian dollar to strengthen much beyond C$1.02 on Monday, and the next resistance levels for the currency are seen near C$1.01-C$1.0150 and the 20- and 200-day moving averages around C$1.0077-C$1.0081.

Canadian government bond prices edged lower across the curve with the two-year bond down 4 Canadian cents to yield 1.090 percent, while the benchmark 10-year bond was down 13 Canadian cents to yield 1.814 percent.