CANADA FX DEBT-C$ slips with euro on EU action doubts

Tue May 22, 2012 4:32pm EDT
 
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* C$ ends at C$1.0218 vs US$, or 97.87 U.S. cents
    * Currency outperforms most G10 peers
    * Bond prices mostly lower after recent rally

    By Jennifer Kwan	
    TORONTO, May 22 (Reuters) - Canada's dollar stumbled against
its U.S. counterpart on Tuesday, mimicking moves in the euro
that reflected investor uncertainty about whether European
leaders would agree on new measures to tackle the region's debt
crisis.	
    The performance of global equity and currency markets was
mixed ahead of a meeting of European Union leaders on Wednesday.	
    There had been hopes that the informal summit may lead to
agreement on measures to boost euro zone growth, but investors
were not confident of a breakthrough given apparent differences
in opinion between Germany and France.	
    French President Francois Hollande is expected to push for a
joint euro zone bond, a measure backed by Italy, Spain and the
European Commission. However Germany, Europe's largest economy,
opposes the move and continues to champion austerity measures.
 	
    The euro fell against the dollar for the first time in three
days on Tuesday as investors doubted whether the meeting of
European leaders this week would yield much progress. 	
    "It's just skepticism that Europe is going to be able to do
anything. I'd be surprised if anything came out of this," said
Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO Capital Markets.	
    The Canadian dollar ended at C$1.0218 versus the U.S.
currency, or 9 7.87 U.S. cents, down slightly from Friday's North
American session close at C$1.0208 versus the U.S. dollar, or
97.96 U.S. cents. Most Canadian markets were closed on Monday
for the Victoria Day holiday.	
    Despite ending the session on a weaker note, the Canadian
dollar outperformed most other major currencies, except the
greenback and British pound.	
    But Canada's dollar traded in a relatively tight range of
C$1.0152-C$1.0235 against the U.S. dollar, giving up most of its
gains near the end of the session.	
    That decline coincided with weakness in U.S. stocks, which
fell late on Tuesday as traders cited renewed market talk about
the potential for Greece to leave the euro zone, while
Facebook's stock fell towards session lows on doubts
about its valuation. 	
    "The focus is on Europe and what's transpiring there and
Canada is just holding ground," said Camilla Sutton, chief
currency strategist at Scotiabank.	
    BMO's Reitzes said he expect the Canadian currency to be
stuck in a near-term range of C$1.0050-C$1.0250 against its U.S.
counterpart.	
    Canadian government bonds prices mostly retreated alongside
U.S. Treasuries, as many investors sold to lock in recent gains.
 	
    The rally last week pushed Canada's 30-year government bond
yield to a record low. 	
    Canada's two-year government bond edged 1
Canadian cent higher to yield 1.211 percent, while the benchmark
10-year bond sank 15 Canadian cents to yield 1.912
percent.