CORRECTED-CANADA FX DEBT-C$ slips vs US$, hits all-time high vs euro

Mon Jul 23, 2012 1:38pm EDT
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(Corrects fifth paragraph to show Murcia has not sought aid)
    * C$ at C$1.0176 vs US$, or 98.27 U.S. cents
    * C$ hits record high versus euro
    * Bond prices advance across the curve

    By Claire Sibonney
    TORONTO, July 23 (Reuters) - The Canadian dollar eased to a
more than one-week low against its U.S. counterpart but climbed
to an all-time high versus the euro on Monday as investors fled
riskier assets on fears that Spain will not be able to avoid a
costly sovereign bailout.
    Spanish bonds yields soared to their highest levels since 
creation of the euro, despite euro zone finance ministers
approving on Friday terms for a loan of up to 100 billion euros
for Madrid to recapitalize its banks. Analysts said this was the
prime driver of the euro's fall. 
    The euro hit a two-year low against the U.S. dollar and a
record trough versus Canada's currency at C$1.2280, or
81.43 U.S. cents. 
    "Euro/CAD still looks attractive to sell because the
problems in the euro zone are much more deep-seated and
structural and symptomatic about broader uncertainties within
the whole ... single currency area," said Jeremy Stretch, head
of currency strategy at CIBC in London.
    Murcia looked on course to bec o me the second Spanish region
to request financial assistance from the government, after
Valencia, with media reports suggesting six regions could seek
    Against the greenback, the Canadian dollar slipped
to its lowest level since July 13, tracking global equities and
oil prices down in the absence of any major economic data.
    At 8:17 a.m. (1217 GMT), Canada's currency was at C$1.0176
versus its U.S. counterpart, or 98.27 U.S. cents, down from
Friday's North American session close of C$1.0127 against the
U.S. dollar or 98.75 U.S. cents.
    Stretch noted however that the Canadian dollar still
remained supported by a combination of positive factors,
including the tightening bias of the country's central bank.
    Most Canadian primary dealers expect the Bank of Canada to
start raising interest rates again by mid-2013, even as its
struggling peers remain in easing mode. 
    "Also the relative fiscal position looks much more
attractive than elsewhere, there isn't any real political
uncertainty and I think that's one of the problems that
continues to afflict a number of jurisdictions is the inability
of politicians to actually take decisions," added Stretch.
     Stretch said a close stronger than the 200-day moving
average of C$1.0108 would encourage the Canadian dollar
environment a bit more, while the 50-day moving average at
C$1.0222 was an area to watch on the topside.
    Canadian bond prices edged higher across the curve, with the
two-year government bond adding 6 Canadian cents to
yield 0.924, while the benchmark 10-year bond CA2YT=RR gained 43
Canadian cents to yield 1.568 percent.

 (Reporting by Claire Sibonney; Editing by Theodore d'Afflisio)