CANADA FX DEBT-C$ plumbs 4-week low on weak data, oil price

Wed Oct 3, 2012 5:05pm EDT
 
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* C$ closes at C$0.9881, or $1.0120
    * Touches weakest level since Sept. 6
    * Hurt by signs global economy faltering

    By Cameron French
    TORONTO, Oct 3 (Reuters) - The Canadian dollar dropped to a
near four-week low against the U.S. dollar on Wednesday, dragged
down by weak overseas economic data and retreating oil prices.
    The currency's slide was hastened by a broader rally in the
U.S. dollar, which gained against a range of currencies
following the release of more upbeat economic numbers there.
 
    "We pushed down towards the low after the data that was out
this morning, and then things have steadily been reversing (back
and forth) since then," said David Bradley, director of foreign
exchange trading at Scotiabank.
    "Given the fact that crude's down four bucks, I think the
Canadian dollar's probably holding in quite well."
    Crude oil prices posted their largest drop in four months
during the session, hurt by fears that a recession could further
hurt global demand for raw materials. 
    Canada's large energy industry and role as an oil and gas
exporter means that the currency often follows the lead of crude
prices. But the main move was courtesy of overnight data.
    China's official purchasing managers' index fell sharply in
September as growth in the manufacturing industry stabilized at
a slower pace, raising concerns about commodity demand.
 
    Australia's trade deficit blew out to its widest in
three-and-a-half years in August as falling commodity demand ate
into export earnings, while business surveys showed euro zone
companies dealing with dwindling new orders and faster
layoffs.  
    The Canadian dollar closed at C$0.9881 to the U.S.
dollar, or $1.0120, down from C$0.9843, or C$1.0160 on Tuesday.
    It hit a session low of C$0.9886, or $1.0115, its weakest
point since Sept. 6.
    While the currency has been on the defensive of late,
analysts said payroll reports due from Canada and the United
States on Friday could jar it out of its recent trend. 
    "If the Canadian numbers surprise to the topside that would
probably take some of the wind out of the sails of this move,"
said Matt Perrier, director of foreign exchange sales at Bank of
Montreal.
    Indeed, despite its recent decline, the currency is still
comfortably above parity with the U.S. dollar. And a Reuters
poll published on Wednesday showed the Canadian dollar is
expected to strengthen in the coming year, boosted by a hawkish
Bank of Canada and the U.S. Federal Reserve's efforts to bolster
the recovery with fresh stimulus. 
    
    DATA, CENTRAL BANKS AHEAD
    In addition to the jobs data, central bank decisions could
impact the currency's moves ahead of the Canadian Thanksgiving
long weekend.
    The European Central Bank will decide on Thursday whether to
hold rates or cut them to offer further support for stumbling
euro zone countries. 
    The Bank of Japan is expected to keep monetary settings
unchanged on Friday even as weakening Asian manufacturing
activity clouds the outlook. The bank is seen preferring to
spend some time reviewing the effects of its policy loosening
last month. 
    Canadian government bond prices were mixed, with the
two-year bond unchanged to yield 1.064 percent, while
the benchmark 10-year bond rose 2 Canadian cents,
yielding 1.722 percent.