CANADA FX DEBT-C$ tracks world shares lower ahead of Fed

Thu Aug 30, 2012 9:26am EDT
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* C$ slips to C$0.9914 vs US$, or $1.0087
    * Bond prices climb across the curve
    * Current account deficit widens more than expected

    By Claire Sibonney
    TORONTO, Aug 30 (Reuters) - Canada's currency fell against
the U.S. dollar on Thursday, weighed by uncertainty over central
bank action to stimulate the global economy.
    Markets are waiting to see whether U.S. Federal Reserve
Chairman Ben Bernanke will provide any hints of a third round of
quantitative easing at a meeting of central bankers in Jackson
Hole, Wyoming, on Friday. 
    Investors' reluctance to take on big bets before Friday
dragged down world shares on Thursday, and with them, other
riskier assets such as the Canadian dollar, too. 
    "It looks like it's another day of markets being slightly
negative for risk and CAD being carried along by that," Adam
Cole, global head of foreign exchange strategy at RBC Capital
Markets in London.
    Traders also expressed some doubts about the European
Central Bank's next steps to tackle the region's three-year-old
debt crisis.
    The ECB is expected to unveil concrete plans to help crimp
crippling borrowing costs in Spain and Italy at a policy meeting
on Sept. 6.
     At 8:53 a.m. ET (1253 GMT), the Canadian dollar stood at
C$0.9914 versus the greenback, or $1.0087, down from Wednesday's
close at C$0.9895 against the U.S. unit, or $1.0106.
    The currency barely moved after a report showed Canada's
current account deficit widened more than expected in the second
quarter, mainly due to lower exports of energy and a higher
level of imports. 
    But the report serves as a reminder that the Canadian
dollar's recent strength is mainly due to capital and not
trade-related flows, leaving it vulnerable to capital flight if
global worries re-emerge, CIBC World Markets' Emanuella Enenajor
wrote in a note.
    North American economic data due to be released later on
Friday, including U.S. weekly jobless claims, may provide
markets with further direction.
    Beyond the Canadian dollar's session low around C$0.9920,
analysts said the currency could find support near its 50-, 100-
and 200-day moving averages, which are near C$1.01.
    Canadian bond prices crept up across the curve, with the
two-year bond up 3 Canadian cents to yield 1.125
percent and the benchmark 10-year bond up 21
Canadian cents to yield 1.778 percent.