CANADA FX DEBT-C$ stumbles as global growth concerns weigh

Mon Jul 5, 2010 4:19pm EDT
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   * Ends at C$1.0650 to the U.S. dollar, or 93.90 U.S. cents
 * C$ dragged down by weak global stocks, oil
 * Bond prices firmer across curve
 (Updates to close, adds quotes, details)
 By Jennifer Kwan
 TORONTO, July 5 (Reuters) - The Canadian dollar weakened
against the U.S. dollar on Monday as commodity prices fell on
persistent concerns about a slowdown in global growth.
 Weak world equity and oil prices -- key barometers of
global growth outlook and investor risk appetite -- helped to
send the currency as low as C$1.0678 to the U.S. dollar, or
93.65 U.S. cents, its weakest level since June 7. [MKTS/GLOB]
[O/R] [FRX/]
 Recent data showing the U.S. labor market shrank in June
for the first time this year, coupled with slower Chinese
manufacturing activity and euro zone austerity measures, fueled
concerns over prospects for the global economy.
 "The outlook is quickly shifting to what the expectations
are for the Bank of Canada on July 20 as well as how the
downshift in global growth is going to impact the Canadian
economy generally," said Camilla Sutton, currency strategist at
Scotia Capital.
 Canada's central bank raised its key interest rate to 0.5
percent from 0.25 percent on June 1 but has given no hints as
to its next move, scheduled for July 20. Yields on overnight
index swaps, which trade based on expectations for the Bank of
Canada's key policy rate, showed the market sees a 56 percent
chance of a July rate hike. [BOCWATCH]
 The Canadian dollar finished at C$1.0650 to the U.S.
currency, or 93.90 U.S. cents, down from Friday's finish at
C$1.0624 to the U.S. dollar, or 94.13 U.S. cents.
 Less than three months ago, the U.S. and Canadian
currencies were trading one for one, but the shift in recovery
expectations and turmoil in Europe have since weighed on
Canadian dollar.
 Sutton said given the global backdrop, key technical levels
to watch out for include C$1.0680 to the U.S. dollar and
 "It just highlights that there is still upward momentum in
dollar/Canada and that it does then open up a test back to the
C$1.08 levels," she said.
 "That becomes very significant if we're able to have enough
momentum to push us through there. That would really indicate a
shift in momentum for dollar/Canada."
 Trading was also thin on Monday because of the U.S.
Independence Day holiday.
 "A huge liquidity provider is absent and that just allows
trades to skew one way or the other," said Sutton.
 Canadian government bond prices rose across the curve as
money flowed from equity markets and investors sought the
safety of government debt.
 The two-year government bond CA2YT=RR climbed 7 Canadian
cents to yield 1.409 percent, while the 10-year bond
CA10YT=RR rose 20 Canadian cents to yield 3.081 percent.
 On the data front, the key event will be Friday's domestic
employment figures for June, which are expected to show 15,000
jobs were added in the month, with the unemployment rate
staying steady at 8.1 percent. [ID:nN02188375]
 (Reporting by Jennifer Kwan; editing by Rob Wilson)