CANADA FX DEBT-C$ lower after choppy morning, stocks weigh

Tue Sep 1, 2009 12:09pm EDT
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 * C$ weakens to C$1.1023 to the U.S. dollar
 * U.S. manufacturing expanded in August
 * Bond prices higher across curve
 By Frank Pingue
 TORONTO, Sept 1 (Reuters) - Canada's dollar was down versus
the greenback in a choppy session on Tuesday as the boost it
got from data showing the U.S. manufacturing sector grew in
August was short-lived as stocks tumbled and traders flocked to
the U.S. dollar.
 The turnaround pulled the Canadian currency from an earlier
high of C$1.0910 to the U.S. dollar, or 91.66 U.S. cents, a
level it reached after the Institute for Supply Management said
the U.S. manufacturing sector had its first month of expansion
in more than a year and a half. [ID:nWEN2981]
 But investors concerned that stock prices have run too far
ahead of the economic recovery opted to pocket recent gains and
unload riskier assets, which helped boost the greenback's safe
haven appeal.
 At 11:55 a.m. (1555 GMT) the Canadian unit was at C$1.1023
to the U.S. dollar, or 90.72 U.S. cents, down from C$1.0950, or
91.32 U.S. cents, at Monday's close.
 Toronto's main stock index was down more than 1 percent
around midday on Tuesday as oil prices turned lower and dragged
down the resource-heavy index, while the index's financial
group continued to weigh heavily. [ID:nTOR004927]
 "We saw the risk currencies generally underperform a little
bit in the overnight session and that's probably accentuated a
little bit more since the North American market has really got
going here," said Shaun Osborne, chief currency strategist at
TD Securities.
 With no Canadian data due until the end of the week, the
currency's performance is expected to be influenced by the
direction in equities and prices for oil.
 Friday's key jobs report is expected to show Canada shed
10,000 jobs in August, while the unemployment rate is pegged to
rise to 8.7 percent. U.S. employment is also due on Friday.
 Canadian bond prices recouped early losses and moved higher
across the curve as the drop in equities sparked demand for
more secure assets such as government debt.
 But analysts noted price moves are likely to be limited
ahead of  key jobs data from Canada and the United States on
 "Realistically we are sort of trapped in these ranges ahead
of the payrolls numbers on Friday in both countries," said Mark
Chandler, fixed income strategist at RBC Capital Markets.
 Earlier, Canada set price guidance on its $3 billion
five-year global note. The notes are expected to yield about 12
to 15 basis points below midswaps. [ID:nN01482265]
 Chandler said there appeared to be strong demand for the
offering. Canada said last week it planned to issue a U.S.
dollar bond for the first time in a decade to meet obligations
made to the International Monetary Fund. [ID:nN28386471]
 The two-year bond CA2YT=RR was up 6 Canadian cents at
C$99.51 to yield 1.250 percent, while the 10-year bond
CA10YT=RR was up 13 Canadian cents at C$103.25 to yield 3.355
 The 30-year bond CA30YT=RR rose 15 Canadian cents to
C$118.90 to yield 3.881 percent.
 Canadian bonds underperformed their U.S. counterparts
across much of the curve. The Canadian 10-year bond yield was
about 2.00 basis points below its U.S. counterpart, compared
with 3.20 basis points on Monday.
(Editing by Peter Galloway)