CANADA FX DEBT-C$ stumbles as stocks dive, greenback climbs

Mon Oct 4, 2010 5:01pm EDT
 
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 * C$ ends at 97.85 U.S. cents
 * Bonds follow U.S. Treasures higher
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Oct 4 (Reuters) - Canada's dollar faltered against
the U.S. currency on Monday with the Canadian currency getting
weighed down by weak equity prices and the greenback getting a
lift as the euro slid on concerns about the financial health of
euro zone banks.
 U.S. equities, typically a barometer of risk appetite, sank
on Monday after disappointing economic data combined with
worries about euro zone debt pushed investors away from riskier
assets and sparked profit-taking after the stock market's
recent rally. [.N]
 The euro fell from more than a six-month high against the
U.S. dollar as renewed concerns about the financial viability
of euro zone banks made investors cut overly bullish bets on
the currency. [FRX/]
 "It reflects some concerns about the banking system there,"
said Mark Chandler, head of Canadian fixed income and currency
strategy.
 A Swiss plan to tighten banking rules raised fears that
bank profits would fall, while soft growth outlooks from
Ireland and Greece put sovereign debt concerns in the spotlight
again. [FRX/]
 Chandler said investors may also be shunning risk ahead of
key employment data due later this week.
 "There are some fears about whether we might have soft
employment reports in both Canada and the U.S. at the end of
the week (and this) has sort of brought back the risk
aversion," he said.
 In Canada, forecasters are looking for a gain of 10,000
jobs in September, and an unemployment rate of 8.1 percent.
[ID:nN01221816]
 September U.S. nonfarm payrolls are forecast to remain
unchanged after a loss of 54,000 jobs in August, according to a
Reuters poll of economists. [ECI/US]
 The Canadian currency CAD=D4 ended at C$1.0220 to the
U.S. dollar, or 97.85 U.S. cents, after earlier soaring as high
as C$1.0180 to the U.S. dollar, or 98.23 U.S. cents, its
highest level since Aug. 6. On Friday, the currency finished at
C$1.0205 to the U.S. dollar, or 97.99 U.S. cents.
 David Bradley, director of foreign exchange trading at
Scotia Capital, noted there is "strong demand" when the
Canadian currency strengthens beyond C$1.0190 to the U.S.
dollar.
 "We've been in such a tight range in dollar/Canada recently
that I think the corporate base we have, non-exporter types and
especially some of our customers south of the border, are
looking to pick up U.S. dollars on any moves on extreme levels
of the range."
 The Canadian dollar has traded recently in roughly a range
between C$1.02 to C$1.03 to the U.S. dollar.
 BONDS HIGHER
 Canadian government bond prices were flat to higher as
money flowed to safe-haven government debt.
 The market followed U.S. Treasury prices, which rose on
Monday as stock market losses and the prospect of the U.S.
Federal Reserve buying more assets to support the economy
spurred demand. [US/]
 "We've had yields down, bond prices higher, largely
tracking equities which have slipped after a good run,"
Chandler said.
 The two-year bond CA2YT=RR ticked 2 Canadian cents higher
to yield 1.363 percent, while the 10-year bond CA10YT=RR
added 40 Canadian cents to yield 2.749 percent.
 (Editing by Peter Galloway)