WORLD FOREX: Euro Gives Up Gains; Canadian Dollar Soars

NEW YORK (Dow Jones)--The euro surrendered its earlier gains made on the back of a better-than-expected auction of short-term Greek debt Tuesday, as lingering, longer-term concerns over the fiscally strapped euro-one periphery weighed down the common currency.
The Canadian dollar, meanwhile, soared against the greenback--with the U.S. currency dipping below parity with the Canadian dollar--after the Bank of Canada stood pat on key interest rates but signaled monetary policy could soon tighten based on a steadily improving economy.
"The Canadian dollar is the star of the day," said Carl Forcheski, director of foreign exchange at Societe Generale in New York. The Canadian currency gained more than 1.6% against the greenback by late morning trading.
Around noon Tuesday, the euro was at $1.3439 from $1.3469 late Monday, according to EBS via CQG. The dollar was at Y93.36 from Y92.38, while the euro was at Y125.46 from Y124.42. The U.K. pound was at $1.5338 from $1.5316. The dollar was at CHF1.0685 from CHF1.0641.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.086 from 81.015.
The BOC on Tuesday firmly stated that rate hikes are coming by explicitly removing its year-old conditional commitment to keep the overnight target rate at the lowest possible level of 0.25%.
In a clear signal it could raise rates in June, the Bank of Canada said that with recent improvements in the economic outlook, the need for its low-rate pledge is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus.
Slow-growth economies and debt-laden peripheral countries continued to weigh on the euro, which earlier hit a peak of $1.3523 after Greece raised EUR1.95 billion of three-month funds with a yield comfortably below its 4% pain threshold.
Still, the yield is much higher than the 1.67% at the previous auction in January and compares with a July 2010-dated German Treasury bill, or bubill, trading at 0.26%/0.22%.
But the common currency slipped against the dollar by late afternoon as lingering questions remained over the longer-term prospects for Greek financing and over the mechanics of an International Monetary Fund-E.U. bailout plan.
In Sweden, the Riksbank left its interest rates unchanged at 0.25% as expected but the central bank said that increases toward a "more normal level" will begin in the summer or early autumn. The Swedish krona gained around 0.4% against the dollar and more than 0.7% against the euro by late-morning trading.
The Reserve Bank of Australia pushed the Australian dollar higher Tuesday after minutes from the central bank signaled further rate hikes lie ahead. Also buoyed by rising commodity prices, the Australian dollar gained nearly 0.8% against the dollar.
India's central bank Tuesday also increased key interest rates, highlighting the entrenching global recovery. The Indian rupee strengthened against the dollar.
On a day when global central banks took center stage inching toward monetary policy normalization, the yen declined broadly, as the Bank of Japan is seen as lagging its peers; some officials have suggested the bank will actually loosen policy further to stimulate an economy that struggles with deflation.
The dollar gained nearly 1% against the yen, and even the beleaguered euro gained more than 0.7% against the Japanese currency.
"The global recovery is broadening and the aggressive monetary easing doled out in 2009 will give way to continued policy normalization in 2010 across major economies," with Japan likely to keep policy loose for a longer period of time, said analysts at Mizuho Corporate Bank in New York, weighing on the low-yielding yen.