CANADA FX DEBT-C$ stumbles as European fears overhang

Thu May 24, 2012 4:46pm EDT
 
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* C$ ends at C$1.0271 vs US$, or 97.36 U.S cents
    * Touches 4-month low hit on Wednesday
    * Bond prices climb on Europe worries
    * Canadian 30-year bond yield hits record low

    By Jennifer Kwan	
    TORONTO, May 24 (Reuters) - Canada's dollar sank against its
U.S. counterpart on Thursday, once again touching its lowest
level since January, as investors fretted about the health of
the global economy following weak economic data from Europe,
China and the United States.	
    Global stocks, the euro and other assets considered risky
fell as data suggested Europe's debt woes were spreading and
worsening a global economic slowdown, adding to investor
concerns about Greece's possible departure from the euro zone.
  	
    "It's been another day of unsettled markets," said Steve
Butler, managing director of foreign exchange trading at
Scotiabank. "Markets have been up and down all day with people
closely following the situation in Greece."	
    The Canadian dollar, ended at C$1.0271 versus the
U.S. dollar, or 97.36 U.S. cents, down from W ednesday's close a t
C$1.0242 versus the U.S. currency, or 97.64 U.S. cents.	
    The currency weakened as far as C$1.0296, matching the
four-month low hit on Wednesday, on broader market uneasiness
over Greece's possible exit from the euro zone.	
    At least half of euro zone governments as well as banks and
large companies are making contingency plans in case Greece
decides to leave the single currency area, even though the
preferred option is still for Athens to keep the euro.
 	
    The euro hovered just above a two-year low against the
dollar in volatile trade on Thursday. 	
    Paul Taylor, chief investment officer at BMO Harris Private
Banking, said the uncertainty in Europe could hit Canada
disproportionately due to the country's exposure to resources,
hurting the Canadian dollar.	
    "Investors would vote with their feet and would move into
U.S. dollars in a big way and even though we have a very strong
federal fiscal situation here in Canada, we would definitely
experience some sort of a selloff," he told a BMO conference
call.	
    He said the Canadian currency, now worth more than 97 U.S.
cents, could weaken to the mid-90s level if the situation
worsens.	
    Canadian government bond prices climbed across the curve
with the two-year bond up 3 Canadian cents to yield
1.139 percent, while the benchmark 10-year bond 
edged 14 Canadian cents higher to yield 1.862 percent.	
    The yield on the 30-year bond hit a record low
2.38 percent.