CANADA FX DEBT-C$ falls as stimulus hopes fade, China outlook
* C$ at C$1.0336 vs US$, or 96.75 U.S. cents * Bond prices mostly higher By Jon Cook TORONTO, June 8 (Reuters) - The Canadian dollar fell against the U.S. currency on Friday as hopes for further stimulus action from global central banks faded, despite the prospect of slower economic growth in China and a credit ratings downgrade for debt-ravaged Spain. The lack of a clear signal on Thursday from U.S. Federal Reserve Chairman Ben Bernanke that the central bank's June 19-20 meeting would bring in a new round of quantitative easing overshadowed what had been a positive reaction in world markets to a surprise Chinese interest rate cut. The Canadian dollar rallied to a one-week high at C$1.0210 versus the U.S. dollar, or 97.94 U.S. cents, after the Chinese central bank's move on Thursday, but gave back gains following Bernanke's comments and as analysts predicted further weak data out of China this weekend. "There's lots of worry about the activity indicators that come out of China tomorrow," said Adam Cole, global head of foreign exchange strategy at Royal Bank of Canada in London. "That generally gave markets a much less positive tone for risk and that took all the risk-proxy currencies lowe r including the Canadian dollar." Markets also worried about how Madrid can solve the crisis at many of its banks caused by a property crash and recession, a job complicated by Fitch's announcement on Thursday that it cut Spain's sovereign credit rating by three notches to BBB from A. "There's still questions hanging over the market as to whether Spain needs and is prepared to ask for external help in recapitalizing the banks and there seems to be no clarity coming out on that and markets are selling risk on the back of it," said Cole. At 8:03 a.m. (1203 GMT), the Canadian dollar was at C$1.0336 against the U.S. currency, or 96.75 U.S. cents, down from Thursday's close at C$1.0279 or 97.29 U.S. cents. In the near term, Cole said the currency would likely stay in a range of C$1.02 on the high end and C$1.04 on the low end. Since data last week showed weak U.S. job creation in May, there has been rising speculation of more stimulus measures from global central banks. The Bank of Canada joined the European Central Bank in holding rates on Tuesday, but the tone of its statement signaled that its next move would be a rate hike. The market expects that the Canadian May employment figures due out later on Friday will not match the outsized job gains in the previous two months, which averaged almost 72,000 a month. The median forecast in a Reuters survey of economists is for a gain of 10,000. Canadian bond prices were mostly higher. The two-year bond rose 9 Canadian cents to yield 1.004 percent, while the benchmark 10-year bond climbed 54 Canadian cents to yield 1.757 percent.
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