CANADA FX DEBT-C$ eases ahead of unpredictable election results

Mon May 2, 2011 4:38pm EDT
 
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   * C$ edges down to $1.0517, bond prices flat
 * Canada general election seen too close to call
 * Bin Laden death weighs on commodity prices
 (Updates to close, adds details, quotes)
 By Claire Sibonney
 TORONTO, May 2 (Reuters) - The Canadian dollar softened
against the U.S. currency on Monday, pulled down by weaker
commodity prices after U.S. forces killed al Qaeda leader Osama
bin Laden and uncertainty over the day's federal election.
 A too-close-to-call election could give the ruling
Conservatives a more solid grip on power or, just as easily,
force them out of office.  [ID:nN02201446]
 "The election is certainly on global participants' minds
... markets are somewhat nervous," said Camilla Sutton, chief
currency strategist at Scotia Capital.
 "Even though tonight we get the results it doesn't
necessarily end all the uncertainty as to what happens. So
there could still be more to come in the weeks and even months
ahead."
 The right-of-center Conservatives, who have governed Canada
since early 2006, started the campaign with a healthy lead. But
that lead dwindled in the face of a campaign by the
left-leaning New Democrats, a pro-labor party that has never
held power in Canada.
 Another drag on Canada's commodity-linked currency was a
drop in the price of oil and gold in thinly traded and volatile
markets amid hopes that the death of the West's most wanted man
would curb global security risks. [O/R] [GOL/]
 The currency CAD=D4 ended the North American session at
C$0.9508 to the U.S. dollar, or $1.0517, down from Friday's
close at C$0.9464 to the U.S. dollar, or $1.0566.
 Analysts say in the short-term, the 3-1/2 year high hit on
Friday at C$0.9440 to the U.S. dollar, or $1.0593, will be
closely watched.
 "If we did see something like a Conservative majority, we
could play a little bit of a catch-up here," added Sutton.
 She placed near-term support for the Canadian dollar around
C$0.9550 and noted that liquidity was lighter than usual with
holidays in the UK and much of Asia.
 John Curran, senior vice president at CanadianForex, said
the Canadian dollar should bounce back despite some
underperformance related to the election.  
 "I don't think it's going to matter who gets in. Eventually
the market will come to the terms (with the fact that) Canada
is a stable country. Things will be fine and the Canadian
dollar will strengthen," Curran said.
 Canadian bond prices were little changed across the curve,
tracking U.S. Treasuries, as traders concluded the global war
on terror and related safety bids for bonds will continue even
after bin Laden's death.
 The two-year bond CA2YT=RR was unchanged to yield 1.704
percent, while the 10-year bond CA10YT=RR  rose 7 Canadian
cents to yield 3.204 percent.
 (Editing by Jeffrey Hodgson)