CANADA FX DEBT-C$ dips on Europe, China disappointments
* C$ down at C$1.0256 vs US$, or 97.50 U.S. cents * Bond prices climb across the curve By Claire Sibonney TORONTO, May 30 (Reuters) - The Canadian dollar eased against the greenback on Wednesday as concerns grew about Spain's ailing banking sector and soaring borrowing costs, and after Italy was forced to pay dearly to sell debt. Markets were also let down after China signaled it is not planning a large stimulus package, in line with the view of Chinese policy advisers. "The news flow overnight has not been particularly encouraging, so a lot of uncertainty still within Europe and pressure on the peripheral bond markets," said Shaun Osborne, chief currency strategist at TD Securities. "I think China downplaying again the potential for stimulus measures have also contributed to this sort of risk-off undertone for the markets but it's really about watching the headlines and watching what's going on in Europe." Spain is expected to issue new bonds soon to fund its ailing banks and indebted regions despite its borrowing costs nearing the unsustainable 7 percent level that forced other euro zone countries to seek international aid. Adding to the euro's woes, Italy sold bonds at a very high cost, with 10-year yields topping 6 percent for the first time this year as sentiment on the indebted economy looked vulnerable to contagion from Spain's worsening problems. At 7:53 a.m. (1153 GMT), the Canadian dollar stood at C$1.0256 versus the U.S. dollar, or 97.50 U.S. cents, down from Tuesday's North American session close at C$1.0229 versus the U.S. dollar, or 97.76 U.S. cents. Osborne noted that the commodity currencies such as Canada's were generally underperforming but the Canadian dollar has potential to outperform on the crosses due to its close association with the United States. He said euro/Canada and Aussie/Canada in particular "look ripe for some Canadian dollar appreciation." Against the U.S. dollar however, Osborne cautioned that the Canadian dollar could slip to the C$1.05 or C$1.06 area in the next month or two given the Canadian dollar has weakened five big figures, from C$0.98 to C$1.03, in the last four weeks. Later in the week, the closely watched U.S. jobs report and Canadian growth numbers will provide further direction for currency traders. Canadian government bond prices picked up across the curve with Canada's two-year bond up 6 Canadian cents to yield 1.136 percent, while the benchmark 10-year bond climbed 46 Canadian cents to yield 1.824 percent.
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