CANADA FX DEBT-C$ hits 2-week low on commodities sell-off

Wed May 4, 2011 12:27pm EDT
 
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 * C$ falls to C$0.9598 vs US$, or $1.0419
 * Bond prices track Treasuries higher
 By Claire Sibonney
 TORONTO, May 4 (Reuters) - Canada's dollar retreated to a
two-week low against the U.S. dollar on Wednesday, driven down
by a slide in the price of U.S. crude oil and drops in other
commodity prices.
 The broad sell-off in commodities also dragged equities
sharply lower as investor appetite for risk-taking shriveled
due to concerns about a slowdown in the Chinese economy as well
as a U.S. report that showed a sharp pullback in services
sector growth in April. [MKTS/GLOB]
  U.S. oil prices were also hit by inventory data showing a
larger-than-forecast increase in crude stockpiles, and slipped
below $110 a barrel. Silver was headed for its third day of
losses. [O/R] [GOL/]
 Conversely, the U.S. data helped push up safe-haven
Canadian government bonds, which tracked U.S. Treasuries
higher.
  "The Canadian dollar being a commodity-based currency it
seems to be taking a bit of a hit along with the Australian
dollar," said John Curran, senior vice president at
CanadianForex, a commercial foreign exchange dealing firm.
 "It's a general strengthening of U.S. dollars in any case
... This move in commodities has hurt the Canadian dollar and
probably caught a few people on the wrong foot."
 The results of the Canadian general election on Monday,
which gave the business-friendly Conservatives a stable
majority government, initially pushed the Canadian dollar to a
near 3-1/2 year high. But so so far the election has had little
lasting impact despite market expectations it would allow the
Canadian dollar to catch up with gains made recently by other
commodity-supported currencies.
 "People were hoping for a catch-up based on the election.
That hasn't materialized, I believe it will in the near
future," Curran said.
 At 12:22 p.m. (1622 GMT), the Canadian dollar CAD=D4 was
at C$0.9598 to the U.S. dollar, or $1.0419, down from C$0.9526
to the U.S. dollar, or $1.0498, at Tuesday's close.
 Earlier, it touched its weakest level since April 19.
 Curran said the next major trendline support level for the
Canadian dollar is around C$0.9675.
 The two-year bond CA2YT=RR was up 2 Canadian cents to
yield 1.689 percent, while the 10-year bond CA10YT=RR gained
24 Canadian cents to yield 3.128 percent.
 (Editing by Peter Galloway)