CANADA FX DEBT-C$ falls as U.S. budget, Europe worries bite

Wed Nov 14, 2012 3:04pm EST
 
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* C$ at C$1.0030 vs US$ or 99.70 U.S. cents
    * U.S. fiscal cliff, Europe still in focus
    * U.S. retail sales fall in October

    By Claire Sibonney
    TORONTO, Nov 14 (Reuters) - The Canadian dollar eased
against its U.S. counterpart on Wednesday as investors fixated
on the uncertainty over U.S. budget negotiations and Europe's
debt crisis.
    Taking a hard line in his opening bid before he begins
fiscal talks with U.S. lawmakers later in the week, President
Barack Obama pushed for his proposal to have the wealthy pay
more taxes as a way to tame the federal deficit.
    Investors are wary of the impact that a scheduled $600
billion in tax hikes and severe spending cuts would have on the
U.S. economy if Obama and Congress fail to agree on a plan to
avoid the so-called fiscal cliff.
    "We are in a risk-off type of environment, and I think this
will probably be the case until there's a little more clarity on
the U.S. fiscal cliff," said Carlos Leitao, chief economist at
Laurentian Bank Securities in Montreal.
    Investors were also awaiting any signs of progress in
approving aid for Greece, while a wave of strikes across Europe
to protest against spending cuts and tax hikes kept the focus on
the region's debt crisis.  
    At 2:51 p.m. (1851 GMT), the Canadian dollar was
trading at C$1.0030 versus the U.S. dollar, or $0.9970, softer
than Tuesday's North American finish of C$1.0019, or $0.9981. 
    Adding to the cautious sentiment, the U.S. government
reported retail sales fell in October for the first time in
three months as Superstorm Sandy slammed the brakes on
automobile purchases, suggesting spending lost momentum early in
the fourth quarter. 
    Market players were more concerned, however, with how the
United States will avert potential fiscal constraint in early
2013 that threatens to throw the world's biggest economy back
into recession.
    "That's by and large the main theme that's been filtering
through the markets," said Mazen Issa, macro strategist at TD
Securities.
    Prices for Canadian government debt were little changed
across the curve, mostly underperforming U.S. Treasuries. 
    The two-year bond was up half a Canadian cent to
yield 1.075 percent, while the benchmark 10-year bond
 was down 4 Canadian cents to yield 1.698 percent.