CANADA FX DEBT-C$ ends near 4-month low on euro zone worries

Fri May 25, 2012 4:16pm EDT
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* C$ ends at C$1.0295 vs US$, or 97.13 U.S. cents
    * Touches 4-mth low at C$1.0306
    * Spanish debt woes, Greek exit fears weigh
    * Canadian 10-, 30-year bond yields hit record low

    By Jon Cook	
    TORONTO, May 25 (Reuters) - The Canadian dollar ended weaker
on Friday after tumbling to a four-month low against its U.S.
counterpart as investors fretted about Spain's deteriorating
finances and a possible Greek exit from the euro.	
    The euro plumbed a 22-month low against the U.S. dollar
after the president of Catalonia, Spain's wealthiest autonomous
region, said the region is running out of options for
refinancing more than 13 billion euros ($16.27 billion) in debt
that comes due this year. 	
    "There's a lot of uncertainty regarding Europe, and the
Canadian dollar, which is largely a play off risk sentiment, is
reacting accordingly," said Mazen Issa, macro strategist at TD
Securities. "With risk sentiment as bruised as it is, it's hard
to see it going the other way for the moment."	
    The Canadian dollar ended the North American
session at C$1.0295 against the U.S. dollar, or 97.13 U.S.
cents, down from Thursday's close at C$1.0271 versus the
greenback, or 97.36 U.S. cents.	
    The Canadian currency fell as low as C$1.0306 against the
U.S. currency, or 97.03 U.S. cents, its lowest level since Jan.
    Worries were compounded on Friday after Belgium's deputy
prime minister, Didier Reynders, issued a warning over Greece,
saying it would be a "grave professional error" if central banks
and companies were not preparing for a Greek exit from the euro
    Greeks vote again on June 17, with polls showing a close
race between parties supporting and opposing the austerity
measures that are part of the terms of the country's
international bailout, keeping markets on tenterhooks.	
    Issa saw the Canadian currency weakening further in the
weeks leading up to the Greek elections, possibly re-testing
December lows around C$1.04.	
    "It's probably going to be a little bit messy in the
markets," said Issa. 	
    Trading was subdued ahead of the long U.S. holiday weekend.
U.S. financial markets will be closed on Monday for the Memorial
Day holiday.	
    Uncertainty in Europe has hurt the Canadian dollar because
investors have fled to the safety of the U.S. dollar and
government debt.	
    Canadian government bond prices climbed across the curve
with the two-year bond up 13.5 Canadian cents to
yield 1.078 percent, while the benchmark 10-year bond
 climbed 59 Canadian cents to yield 1.805 percent.	
    The safe-haven buying drove longer-term Canadian bond yields
to record lows. The 10-year yield sank as far as 1.796 percent,
while the 30-year bond yield hit an all-time low of
2.336 percent.