CANADA FX DEBT-C$ sags to 1-week low on slow growth outlook

Mon Jul 9, 2012 4:25pm EDT
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* C$ ends at C$1.0193 vs US$, or 98.11 U.S. cents
    * Touches lowest level since June 29
    * Bonds edge higher across curve

    By Jennifer Kwan
    TORONTO, July 9 (Reuters) - The Canadian dollar touched a
one-week low against the U.S. currency on Monday along with
global stock prices on investor uncertainty about the global
growth outlook and concern about Europe's debt crisis.
    Stocks on major world markets fell for a fourth day on
Monday as investors fretted about disappointing economic data in
Asia and parts of Europe, while EU finance ministers met again
to grapple with the euro zone's debt crisis. 
    Diplomats said on Monday that Europe will grant Spain an
extra year to reach its deficit targets after it outlines
further budget savings to a finance ministers meeting in
    Eurogroup finance ministers were trying to flesh out an
agreement by EU leaders at a summit last month on establishing a
European banking supervisor and using the bloc's rescue funds to
stabilise bond markets.
    But with differences persisting between north European
countries and southern states, EU officials said no
breakthroughs were likely this week. 
    "It's a general risk aversion play," said John Curran,
senior vice president at CanadianForex of the general market
    "The euro zone has quite a lot on their plate to discuss,
and I think there's a tendency for market disappointment which
could see the Canadian dollar weaken off." 
    The Canadian currency ended at C$1.0193 to the U.S.
dollar, or 98.11 U.S. cents, after earlier touching a low of
C$1.0222, its lowest since June 29. On Friday, the currency
finished at C$1.0186 versus the U.S. dollar, or 98.17 U.S.
    The key data weighing on the currency was
softer-than-expected Chinese inflation data and a record fall in
Japan's machinery goods orders, which help gauge the strength of
capital spending.
    That followed a disappointingly weak U.S. jobs report on
Friday, and added to worries about the global growth outlook.
    The currency outperformed against some currencies on Monday
including the Japanese yen and New Zealand dollar, but
underperformed against others such as the euro.
    Camilla Sutton, chief currency strategist at Scotiabank,
said she saw the currency trading in a short-term trading range
of C$1.0180 to C$1.0260 to the U.S. dollar. 
    Canadian bond prices edged up across the curve, following
the trend in U.S. Treasuries where debt prices rose and
benchmark yields fell on bets the U.S. Federal Reserve will
embark on large-scale bond buys to stimulate the economy. 
    Wall Street economists see a 70 percent chance the Fed will
engage in a third round of quantitative easing, nicknamed QE3,
according to a Reuters poll conducted shortly after the June
payrolls report on Friday. 
    The two-year government bond edged up 6 Canadian
cents to yield 0.955 percent, while the benchmark 10-year bond
 added 30 Canadian cents to yield 1.658 percent.