CANADA FX DEBT-C$ retreats as oil price slides

Tue Jan 4, 2011 1:00pm EST
 
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 * C$ retreats to 99.69 U.S. cents
 * Bonds prices soften across curve
 (Updates with Canadian dollar turning lower)
 TORONTO, Jan 4 (Reuters) - The Canadian dollar fell close
to a one-week low against the U.S. currency at midday on
Tuesday, spurred by a retreat in the price of crude oil.
 Canada is a major oil producer, and despite a more than 3
percent pullback in crude prhces to below $89 a barrel, many
investors expect the Canadian dollar to trade near par with the
U.S. dollar for some time due to optimism about the world
economy.
 "If we continue to see some decent Canadian economic
releases and no pain out of Europe, then the Canadian dollar
will appreciate as long as we continue to see stronger oil and
commodity prices," said John Curran, senior vice president at
CanadianForex, noting the U.S. dollar had perked up.
 "Markets are getting back to some sort of normalcy. A few
of the other currencies have pulled back...so it makes sense
for the Canadian dollar to give up some of the ground it
gained."
 U.S. factory orders figures for November that showed the
largest gain in eight months helped to boost the U.S. currency.
[FRX/] [ID:nN03158039]
 At 12:37 p.m. (1737 GMT), the currency was at C$1.0031 to
the greenback, or 99.69 U.S. cents, down sharply from Friday's
finish, when it ended the year at C$0.9946 to the U.S. dollar,
or $1.0054.
 The Canadian dollar had shot as high as C$0.9889 to the
U.S. dollar, or $1.011, on Monday, when Canadian financial
markets were closed. This represents a new technical support
level for the U.S. currency against the Canadian dollar, said
Adam Cole, head of global FX strategy at RBC Capital Markets in
London.
 Early on Tuesday, the Canadian currency touched as high as
C$0.9917 to the U.S. dollar, or $1.0084, its highest level
since May 2008. It fell as low as C$1.0035 to the U.S. dollar,
or 99.65 U.S. cents, its lowest level since Dec. 29.
 North American employment data on Friday will provide the
main focus this week, with improvements expected on both sides
of the border. U.S. Federal Reserve Chairman Ben Bernanke's
congressional testimony that day will also be closely watched.
[ID:nN31145126] [ID:nN31145126]
 Canadian bond prices were slightly weaker as the day's
economic data suggested a brighter economic outlook.
 The two-year bond CA2YT=RR was down 1 Canadian cent to
yield 1.672 percent, while the 10-year bond CA10YT=RR dropped
25 Canadian cents to yield 3.147 percent.
 (Reporting by Ka Yan Ng and Claire Sibonney; editing by Peter
Galloway)