CANADA FX DEBT-C$ hits 3-month low on oil, Europe fears
* C$ falls to 93.22 U.S. cents
* Bonds higher on U.S. jobless data, euro zone debt
By Claire Sibonney
TORONTO, Feb 4 (Reuters) - The Canadian dollar slumped to its lowest level in nearly three months on Thursday as oil prices plunged and fresh credit worries in the euro zone hit investors' appetite for riskier assets.
Worries over the financial health of Portugal and Spain have increased on speculation the two countries may face similar problems over their budget deficits and debt as Greece. [ID:nLDE6121AC]
These concerns, along with a less-than-stellar U.S. jobless claims report, helped lift the safe-haven U.S. dollar to an eight-month high versus the euro. [FRX/]
"I think the bottom line is the market is in risk-aversion mode and that generally benefits the U.S. dollar but we've also seen the fact that it looks like Europe is in a lot of trouble," said Steve Butler, director of foreign exchange trading at Scotia Capital.
A stronger greenback also cut investor appetite for oil, which sank 5 percent, the steepest one-day drop since July, and gold, which tumbled to a three-month low. [O/R] [GOL/]
"If you look at most of the other commodity currencies the Canadian dollar has been doing quite well, I think, and I'm not surprised to see a weakening off because we have seen the commodity market really start to melt," said Butler, referring to the New Zealand and Australian dollars, which also hit multi-month lows. NZD=AUD=
Looking forward to Friday's U.S. and Canadian jobs reports, market players expect good news, but it may not be sufficient to boost the Canadian currency against its U.S. counterpart.
"We might have an upside surprise in nonfarm payrolls but people won't care because they'll be hitting the sell button," said David Watt, senior currency strategist at RBC Capital Markets.
Butler added that strong U.S. employment data will only boost the U.S. dollar, while positive domestic numbers may only have a fleeting effect.
"It may give us a temporary lift but I think when the market starts to focus on what's happening with commodities and what's happening with risk aversion I think that will weigh a lot more," he said.
Similarly, Bank of Canada Governor Mark Carney's speech on to the Winnipeg Chamber of Commerce reinforced the view that interest rates will stay on hold until at least July, which would also contribute to tempering the Canadian dollar's rise.
The Canadian dollar finished the North American session on Thursday at C$1.0727, or 93.22 U.S. cents. On Wednesday, it closed at C$1.0624, or 94.13 U.S. cents.
It hit a low of C$1.0753, or 93 U.S. cents, during the session, the lowest level since Nov 9.
BONDS RISE AS EQUITIES FALL
As global and domestic equities slid, Canadian government debt added to gains due to persistent fears over European sovereign risk.
Also pushing up the market was a surprise increase in U.S. weekly jobless claims, which pointed to a labor market still under stress even as the U.S. economy grows. [ID:nN03175869]
The two-year bond CA2YT=RR was up 14.5 Canadian cents at C$100.45 to yield 1.277 percent, while the 10-year bond CA10YT=RR gained 55 Canadian cents to C$103.100 to yield 3.359 percent. (Reporting by Claire Sibonney; editing by Peter Galloway)
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