CANADA FX DEBT-C$ at more than 1-wk low as risk rally fades

Mon Feb 27, 2012 8:21am EST
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* C$ weaker at C$1.0034 vs US$, or 99.66 U.S. cents

* Bond prices edge higher

By Claire Sibonney

TORONTO, Feb 27 (Reuters) - Canada's dollar drifted back below parity against the U.S. dollar on Monday to its softest level in more than a week as concerns that rising oil prices could prevent an economic recovery weighed on riskier assets, even commodity currencies.

While surging oil prices, spurred by worries over disruptions to Middle East supplies, can support the resource-linked Canadian dollar, worries about its impact on U.S. and global growth kept investors wary.

The currency tracked the broader move in overseas markets and the euro, undermining optimism about the European Central Bank's second offering of low-cost loans to euro zone banks.

"It's a very straightforward trade, as we're seeing the Canadian dollar slump as risk appetite fades," said Adam Button, currency analyst at ForexLive in Montreal.

"The oil story got a lot of traction on the weekend because we had such a sharp move up in oil, and it's certainly having an effect in sentiment today, especially in the stock market," he added, noting that oil prices retreated on Monday.

At 8:03 a.m. (1303 GMT), the Canadian dollar stood at C$1.0034 versus the U.S. dollar, or 99.66 U.S. cents, down from Friday's North American session close at C$0.9997 to the U.S. dollar, or $1.0003.   Continued...