CANADA FX DEBT-C$ stumbles on fading EU summit hopes

Thu Jun 28, 2012 9:22am EDT
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* C$ lower at 97.13 U.S. cents
    * Markets focused on Europe Union summit
    * Bonds prices edge higher

    By Jennifer Kwan
    TORONTO, June 28 (Reuters) - Canada's dollar fell against
its U.S. counterpart on Thursday in tandem with the euro and
global stocks, with investors skeptical that a major European
Union summit would produce new measures to stem the region's
debt crisis.
    Pessimism pushed the single currency to a three-week low,
while yields on 10-year Spanish bonds soared above 7 percent
ahead of the Thursday meeting in Brussels. 
    "The likelihood of any concrete, actionable outcome from the
summit is probably fairly low in people's minds," said Matt
Perrier, director of foreign exchange sales at BMO Capital
    "The markets are a little softer here on anticipation we'll
just get more of the same lip service to the problem."    
    The two-day EU leaders' meeting is expected to produce a
broad roadmap for fiscal, financial and political union across
the 17-nation currency bloc.
    But German Chancellor Angela Merkel has brushed aside
demands from Italy and Spain for rapid action to lower their
soaring borrowing costs.
    Merkel also dimmed hopes about proposals backed by France
for euro zone countries to assume joint liability for each
other's debts. 
    At around 9:00 a.m. (1300 GMT), the Canadian currency
 was at C$1.0295 to the greenback, or 97.13 U.S. cents,
down from The currency's Wednesday's finish at C$1.0255 to the
greenback, or 97.51 U.S. cents.
    Perrier said the currency will likely stay within a range of
C$1.0230-C$1.0340 versus the greenback, seen in recent weeks,
given low expectations the European summit will produce
significant measures to combat the three-year-old debt crisis.
    The Canadian dollar mostly underperformed against major
currencies including the commodity-linked Australian dollar and
the euro.
    Apart from Europe, other factors added to the sour market
    JPMorgan was in focus on a report that recent trading losses
could reach $9 billion and Barclays stock was down sharply in
the aftermath of a probe into the manipulation of interbank
lending rates. 
    As well, economic data showed the U.S. economy slowed as
expected in the first quarter. 
    Canadian bond prices were largely higher across the curve,
with the two-year Canadian government bond up 8
Canadian cents to yield 0.954 percent, while the benchmark
10-year bond gained 34 Canadian cents to yield 1.689