CANADA FX DEBT-C$ retreats as US$ rallies, risk aversion

Mon Sep 8, 2014 5:15pm EDT
 
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* Canadian dollar at C$1.0973 or 91.13 U.S. cents
    * Bond prices fall across the maturity curve

    By Solarina Ho
    TORONTO, Sept 8 (Reuters) - The Canadian dollar fell on
Monday against a rallying greenback, which posted broad gains
against most currencies following a report that investors expect
the U.S. Federal Reserve to keep interest rates lower for longer
than expected.
    Investor risk aversion rattling global markets and softer
crude prices also pressured the Canadian dollar.
    Investors expect the Fed to keep interest rates lower for
longer, and to raise them more slowly, than the makers of U.S
monetary policy themselves expect, according to the report by
the San Francisco Fed. 
    Scotiabank chief currency strategist, Camilla Sutton, said
the U.S. dollar moves accelerated during the North American
session particularly in the afternoon after the San Francisco
Fed report.
    "It's a broad based U.S. dollar move. Today was all about
the U.S. dollar and very little about CAD," said Sutton.
    The Canadian dollar finished the session at
C$1.0973 to the greenback, or 91.13 U.S. cents, weaker than
Friday's close of C$1.0881, or 91.90 U.S. cents.
    The Canadian dollar also suffered from the overhang of
disappointing labor market data last Friday that showed the
Canadian economy unexpectedly shed jobs in August.
    Data released Monday morning showed the value of domestic
building permits had a surprise surge in July, but that did
little to stem the loonie's weakness. 
    The greenback began the day strongest against sterling,
which dived to its lowest in nearly 10 months after a poll for
the first time showed Scotland was ready to vote to break up its
three-century-old union with the rest of the United Kingdom.
    "It's another disruptive event out there," said Don
Mikolich, executive director of foreign exchange sales at CIBC
World Markets in Toronto, said of the Scottish vote.
    The U.S. dollar also hit a six-year high against the yen and
a more than one-year high against the euro. 
    Canadian government bond prices were mostly weaker across
the maturity curve, with the two-year down 1.5
Canadian cents to yield 1.123 percent and the benchmark 10-year
 down 19 Canadian cents to yield 2.14 percent.

 (Additional reporting by Leah Schnurr; Editing by Diane Craft)