CANADA FX DEBT-C$ hits 6-mth low, bond yields sink to record

Fri Jun 1, 2012 9:32am EDT
 
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* C$ hits 6-mth low of C$1.0443 vs US$, or 95.76 U.S. cents
    * Bond yields tumbled to record lows after weak U.S., Canada
data
    * Traders raise bets of Bank of Canada rate cut by end of
2012

    By Claire Sibonney	
    TORONTO, June 1 (Reuters) - The Canadian dollar hit its
weakest level in six months on Friday and longer-term bond
yields tumbled to record lows as investors scrambled away from
riskier trades after weak North American data added to mounting
concerns about faltering global growth.	
    Canada's dollar touched a low of C$1.0443 against
the greenback, or 95.76 U.S. cents, its softest level since late
November after the U.S. nonfarm payrolls report showed job
growth in May was the weakest in a year. 	
    The commodity-linked currency was also hurt by data that
showed the Canadian economy grew less in the first quarter than
the Bank of Canada had expected. 	
    "You got a double whammy. There goes (Bank of Canada
Governor) Mr. Carney's upbeat Canadian scenario," said John
Curran, senior vice president at CanadianForex.	
    Speculation of a hike in interest rates had heated up after
the central bank used unexpectedly hawkish language in its April
17 policy statement, but the flare-up of the European debt
crisis and some tepid U.S. data have since cast doubt on any
plans to tighten monetary policy.	
    Following Friday's data, traders in fact raised bets of an
interest rate cut by the end of the year. 	
    "The bottom line here is that there's no way the Bank of
Canada is moving this year, in my opinion," said Derek Holt,
vice president of economics at Scotiabank.	
    "Not just on geopolitical risks but also on growth
disappointments on the domestic side of the picture, which adds
a new twist to the policy risks in Canada."	
    The North American data provided a fresh blow to investors
already concerned about the global growth outlook.	
    Earlier in the session, the Canadian dollar was already in
negative territory, tracking world stocks as they dropped toward
2012 lows and U.S. Treasury yields, which hit their lowest in
hundreds of years as euro-zone debt signals flashed red again
and Chinese demand was seen slowing. 	
    At 9:10 a.m. (1310 GMT), the Canadian dollar was at C$1.0411
versus the U.S. dollar, or 96.05 U.S. cents, down from
Thursday's North American session close at $1.0329 against its
U.S. counterpart, or 96.81 U.S. cents.	
    Canadian government bond prices climbed across the curve,
sending longer-dated yields to record lows for another day.
Canada's benchmark 10-year bond yield hit a record
trough of 1.640 percent, while the 30-year yield 
touched a record low of 2.222 percent.	
    The yield on the two-year bond, especially
sensitive to Bank of Canada thinking, marked its lowest level
since January at 0.936 percent.