CANADA FX DEBT-C$ extends losses on Flaherty comments

Wed Aug 5, 2009 8:21am EDT
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 * Fallout lingers from finance minister warning on C$ rise
 * Bond prices weighed by global recovery outlook
 By Ka Yan Ng
 TORONTO, Aug 5 (Reuters) - The Canadian dollar extended
losses against the U.S. currency on Wednesday morning,
pressured by comments by the finance minister that steps could
be taken to deal with the currency's recent strength.
 While other commodity-based and riskier currencies found
favor, the Canadian dollar was excluded as investors considered
the minister's comments, which raised the possibility of policy
makers intervening in the currency market. [ID:nN04143584]
 The voiced concern knocked the Canadian dollar from
10-month highs on Tuesday, and market players continued to
digest Finance Minister Jim Flaherty's remarks on Wednesday.
This was weighed against the Bank of Canada's stance that it
stands ready to take further action to stimulate the economy,
especially if a stronger currency threatens growth.
 "(The Canadian dollar) is underperforming the other
commodity currencies on the back of Flaherty comments
yesterday, which have really made people a little bit nervous,"
said Adam Cole, global head of FX strategy at RBC Capital
Markets in London.
 Riskier currencies were catching a generally well-bid tone
as the North American session was opening and that would
typically carry the Canadian dollar higher, he said, but it's
being "left behind" because of Flaherty's comments.
 For the time being, Cole said the finance minister's
comments will likely have set a floor for the Canadian dollar,
which on Tuesday had shot as high as C$1.0632 to the U.S.
dollar, or 94.06 U.S. cents, its highest level since Oct. 2.
 At 8:15 a.m. (1215 GMT), the Canadian dollar was at
C$1.0774 to the U.S. dollar, or 92.82 U.S. cents, down from
C$1.0745 to the U.S. dollar, or 93.07 U.S. cents, at Tuesday's
 Canadian bond prices were under pressure on Wednesday
morning as European data furthered hopes that the global
economic recovery was gaining steam, taking interest away from
safe haven assets such as government debt.
 Reports showed the deep recession in the euro zone services
economy eased in July and Britain's services sector
unexpectedly surged in the same month, fuelling hopes the
economy might have started growing again in the third quarter.
 The two-year Canadian bond dropped 10 Canadian cents to
C$99.00 to yield 1.493 percent, while the 10-year bond lost 25
Canadian cents to C$101.55 to yield 3.561 percent.
 The 30-year bond fell 30 Canadian cents to C$116.10 to
yield 4.031 percent. In the United States, the 30-year Treasury
yielded 4.491 percent.
 (Reporting by Ka Yan Ng)