CANADA FX DEBT-C$ touches one-week low as risk aversion rises

Mon Feb 2, 2009 4:47pm EST
 
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 * C$ falls towards 80 U.S. cents, lowest since Jan. 23
 * Traders avoid risk ahead of Friday's key jobs reports
 * Weaker commodity, energy prices also weigh
 * Bond prices rally across the curve as stocks falter
 By Frank Pingue
 TORONTO, Feb 2 (Reuters) - The Canadian dollar bounced off
a one-week low hit earlier on Monday but still fell 1.4 percent
versus the U.S. dollar as traders steered clear of risky assets
ahead of key U.S. and Canadian jobs data later this week.
 The Canadian employment report is expected to show the
domestic economy continued to bleed jobs in January and support
calls for more interest rate cuts by the Bank of Canada, which
already lowered its key rate to a 50-year low last month.
 "The market is waiting to see how January's data come out
so they can assess whether or not this recession is deepening
further or has reached a maturity," said Gareth Sylvester,
senior currency strategist at HIFX Plc in San Francisco.
 "There is a lack of risk appetite evident and that may
remain the theme until the latter stage of this quarter when we
can really say with a high degree of certainty what stage of
this current recession we are in."
 The Canadian dollar closed at C$1.2436 to the U.S. dollar,
or 80.41 U.S. cents, down from C$1.2265 to the U.S. dollar, or
81.53 U.S. cents, at Friday's close.
 The currency at one point fell to C$1.2467 to the U.S.
dollar, or 80.21 U.S. cents, its weakest level since Jan. 23.
 Sylvester said the decision by traders to avoid riskier
assets was also an extension of Canadian data released on
Friday that showed the economy shrank more than expected.
 On top of that, prices for oil fell nearly 4 percent due to
gloomy  projections for energy demand. The Canadian currency is
often influenced by swings in oil prices as Canada is a key
exporter of the commodity.
 Much of the rebound in the Canadian currency from session
lows on Monday was pegged to a slide in the greenback, whose
safe-haven bid was diminished after a better-than-expected
reading on U.S. manufacturing.
 Friday's Canadian January jobs data is expected to show the
economy shed 40,000 jobs after losing 34,400 in December.
 Other Canadian data due this week include building permits
for December and January's Ivey Purchasing Managers Index, both
due on Thursday.
 BOND PRICES ALL HIGHER
 Canadian bond prices bounced off recent lows and ended up
across the curve as a lingering effect from last week's soft
GDP report and concerns ahead of the jobs figures contributed
to a fresh wave of demand for more secure government debt.
 Mark Chandler, a fixed income strategist at RBC Capital
Markets said the slide in equity markets overseas and the
ensuing selloff in North America also helped to give bond
prices a lift.
 Investors fled riskier assets like stocks in favor of more
secure government debt overnight as jitters intensified about
poor economic data and falling corporate profits in a rapidly
slowing global economy.
 Toronto's main stock index and the Dow Jones industrial
average both tumbled 0.8 percent.
 Bond prices had been getting hammered in recent weeks on
concerns about supply in both Canada and the United States.
 The two-year bond rose 17 Canadian cents to C$102.55 to
yield 1.329 percent, while the 10-year bond climbed 63 Canadian
cents to C$110.20 to yield 2.988 percent.
 The 30-year bond rose C$1.70 to C$122.90 to yield 3.690
percent. In the United States, the 30-year treasury yielded
3.470 percent.
 (Editing by Jeffrey Hodgson)