CANADA FX DEBT-C$ slips on political uncertainty in Europe

Tue May 8, 2012 8:10am EDT
 
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* C$ falls to C$0.9960 vs US$, or $1.0040
    * Bond prices push higher across curve

    By Claire Sibonney	
    TORONTO, May 8 (Reuters) - The Canadian dollar eased against
its U.S. counterpart on Tuesday as Greece struggled to form a
new government, worrying investors about austerity plans at the
heart of efforts to tackle Europe's debt crisis.	
    Greece's mainstream conservatives failed to reach a
coalition deal following Sunday's election. That gives the Left
Coalition party, which opposes the country's EU/IMF bailout, a
chance to form a government, with the prospect of fresh
elections if it cannot do so. 	
    "The Canadian dollar is lower because of increased risk
aversion and that entirely relates to European political
developments as the Greek election result continues to filter
through the market," said Fergal Smith, managing market
strategist at Action Economics.	
    "The idea that ... the anti-bailout party is going to try to
form a government, the possibility that they'll default on bond
payments and ultimately the risk that they'll be forced to exit
the (European Monetary Union)."	
    Meanwhile, Socialist French president-elect Francois
Hollande has advocated an approach to tackling the debt crisis
centered more on growth, which may create tensions with
Germany's insistence on fiscal austerity.	
    At 8 a.m. (1200 GMT), the Canadian dollar stood at
C$0.9960 versus the U.S. dollar, or $1.0040, down from Monday's
finish at C$0.9930 versus the U.S. dollar, or $1.0070.	
    Smith noted resistance for the U.S. dollar against Canada's
was still in place around parity to C$1.0050.	
    Canadian bond prices edged up across the curve, with
Canada's 2-year bond up half a Canadian cent to yield
1.269 percent, while the benchmark 10-year bond 
gained 11 Canadian cents to yield 2.008 percent.