CANADA FX DEBT-C$ hits 4-day low as caution grows, metals weigh

Wed Oct 10, 2012 4:40pm EDT
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* C$ closes at C$0.9807 versus the U.S. dollar, or $1.0197
    * Currency hits four-day low as cautious mood dominates
    * Limp global growth prospects weigh

    By Alastair Sharp
    TORONTO, Oct 10 (Reuters) - The Canadian dollar hit its
weakest level in four days versus its U.S. counterpart on
Wednesday as concerns about global growth mounted.
    Global stock markets and commodity prices also weakened as
corporate warnings of slower growth underscored concerns about
the sluggishness of the world economy. Rising geopolitical
tensions and questions on the Chinese economy's ability to
rebound also weighed. 
    The International Monetary Fund added to the gloom. In a
semi-annual report, it said the euro zone debt crisis was an
increasing threat to global financial stability and that
confidence was "very fragile". 
    "The sense that all these key issues that the market is
watching aren't showing much progress this week is really the
dominant theme and reason in general that risk is selling off,
and that includes the Canadian dollar," said Greg Moore, foreign
exchange strategist at TD Securities.
    The Canadian dollar closed at C$0.9807 versus the
U.S. dollar, or $1.0197, down from Tuesday's North American
session close of C$0.9786 to the U.S. dollar, or $1.0219. At one
point it hit C$0.9817, its lowest level since Oct. 4.
    Moore said he expects the Canadian dollar to weaken to
parity with the greenback by the end of the year, and to trade
between C$0.9880 and C$0.9745 over the next week.
    The resource-linked currency, which typically does well when
investors are upbeat about global growth prospects, has moved
between C$0.9745 and C$0.9817 against the greenback so far this
    "The news seems to be more bearish than anything else, so
the tactical bias for many of the desks that we're talking to,
including our own, is to play defense in a market like this,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.    
    The IMF report on the world's financial health followed a
downgrade earlier this week by the international lender of its
forecast for global growth. In addition, Alcoa, which
kicked off the U.S. third-quarter earnings season after the bell
on Tuesday, lowered its global aluminum consumption outlook,
citing China as the main reason.  
    Most commodities, including copper and aluminum, were lower,
which weighed on the currency as Canada is a major oil and metal
exporter. Spot gold also fell.  
    Brent crude futures eased in choppy trading on the concerns
about slowing economic growth. 
    National Bank's Spitz said a number of upcoming events were
also keeping investors cautious.
    These include a European Union meeting at which there could
be movement on Greece's debt crisis or a request for aid from
Spain, IMF meetings in Tokyo this week, and the U.S.
presidential election.
    Further out, investors are also worried about the looming 
U.S. "fiscal cliff" - automatic government spending cuts and tax
increases that are due to take effect early in 2013 unless
Republicans and Democrats can agree on alternative measures.
    The move out of riskier assets had a muted impact on
Canadian government bond prices. The two-year bond 
was unchanged and yielded 1.138 percent, while the benchmark
10-year bond gained 6 Canadian cents, to yield 1.798