The Canadian dollar rebounded as the speculation that China may help Europe to deal with the debt crisis eased concerns on markets and boosted stocks.

According to the announcement of the Italian government, Italy discussed potential investment in the nation’s economy with China. This announcement eased concerns that the crisis would spread from Greece to Italy and Spain.

The Standard & Poor’s 500 Index closed higher 0.7 percent over the day, erasing previous 1.6 percent drop. The MSCI World Index of stocks fell 1.1 percent, following the previous decline by 2.4 percent. The stock market affect the Canadian currency as rising stocks signal about economic growth and growth help the loonie.

USD/CAD traded at 0.9918 as of 2:07 GMT today after it fell from 0.9972 to 0.9925, while intraday it reached the high of 1.0025. EUR/CAD traded near 1.3564 after falling from 1.3578 to 1.3527 today. CAD/JPY traded at about 77.71 after yesterday’s rise from 77.61 to 77.72.

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