* C$ rises 0.9 pct to 99.13 U.S. cents
* Bonds prices down across the curve as safety bid unwinds
* Bid-to-cover ratio of 2.083 on 10-year bond auction
(Updates to close of North American session)
By John McCrank
TORONTO, April 28 (Reuters) - The Canadian dollar rose 0.9
percent against the U.S. dollar on Wednesday, helped by firmer
commodity prices and a decision by the U.S. Federal Reserve to
leave its benchmark interest rate low for an extended period.
The Fed voiced cautious optimism about the economic
recovery, as did the Bank of Canada last week. But unlike the
Canada's central bank, the Fed reiterated its intention to keep
interest rates low for the foreseeable future. [ID:nN27125552]
Higher interest rates, or the expectation of higher rates,
attract capital flows and stoke demand for a country's
The Canadian dollar ended the North American session at
C$1.0088 to the U.S. dollar, or 99.13 U.S. cents, up from
C$1.0176 to the U.S. dollar, or 98.27 U.S. cents, at Tuesday's
The currency fell 1-1/2 cents on Tuesday, when debt
downgrades for Greece and Portugal spurred a safe-haven flight
to the U.S. dollar. On Wednesday, Standard & Poor's downgraded
Spain's credit rating by one notch to AA from AA-plus, but
market reaction was muted.
Part of the reason was that there were indications that a
deal was in the works for a much bigger aid package for Greece,
said Doug Porter, deputy chief economist at BMO Capital
Strong U.S. corporate results this earnings season also
helped soothe market anxieties, he said.
"It's fortunate that this wave of bad news out of
Europe is happening at a time when we are getting absolutely
blowout U.S. corporate earnings reports, which is serving to
remind us that the U.S. recovery specifically, and the global
recovery more generally, is progressing a bit faster than
Optimism that the U.S. economic recovery will continue also
benefited commodity prices.
Canada is a major exporter of oil, gold, and base metals,
moves in the prices of which often influence the strength of
the country's currency.
BOND PRICES DROP
Canadian government bond prices tumbled across the curve on
Wednesday alongside U.S. Treasuries after the Fed decision and
as the safe-haven bid for bonds waned with hopes for a
resolution of the sovereign debt problems in Europe.
"It was a bit of a positive day for a change with respect
to the sovereign debt situation," said Mark Chandler, fixed
income strategist at RBC Capital Markets.
"There are obviously still a lot of hurdles, but the talk
of a possibly bigger bailout for Greece calmed the market."
A C$3 billion auction of 10-year Canadian government bonds
saw lower than expected demand. It produced an average yield of
3.728 percent, up from 3.577 percent at the previous auction.
Bids from primary dealers totaled C$6.249 billion,
resulting in a bid-to-cover ratio of 2.083, well below the
previous auction. The ratio is a gauge of investor demand and a
reading above 2 generally indicates a successful auction.
The two-year Canadian government bond <CA2YT=RR> fell 11
Canadian cents to C$99.15 to yield 1.975 percent, while the
10-year bond <CA10YT=RR> dropped 45 Canadian cents to C$100.61
to yield 3.671 percent.
(Reporting by John McCrank; editing by Peter Galloway)