CANADA FX DEBT-C$ tracks slide in oil price, hits 2-wk low

Thu May 5, 2011 8:28am EDT
 
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 * C$ falls nearly a penny, pares losses
 * Oil, other commodity price slide sparks similar C$ move
 * C$ at C$0.9655 to the U.S. dollar, or $1.0357
 * Bond prices mildly firmer
 By Ka Yan Ng
 TORONTO, May 5 (Reuters) - The commodity-linked Canadian
dollar was yanked to its lowest in more than two weeks against
the U.S. currency on Thursday, extending its recent slide on
sharply lower oil prices.
 The sell-off in oil followed bearish inventory data from
the United States on Wednesday and discouraging economic data,
but the real selling kicked in when Brent crude futures crashed
through an important technical level of $120 a barrel.
 U.S. crude was also on a steep decline, as were other
commodity markets such as copper and silver. North American
equity futures pointed to a lower open.
 The Canadian dollar, which traded in a modest 30-point
range overnight, tracked the price of oil sharply lower, diving
nearly a penny from the previous session's close. It fell as
low as C$0.9675 to the U.S. dollar, or $1.0336, it lowest since
April 18.
 At 8:10 a.m. (1210 GMT), the Canadian dollar CAD=D4 had
pared losses to stand at C$0.9655 to the U.S. dollar, or
$1.0357, down from Wednesday's North American session finish at
C$0.9585 to the U.S. dollar, or $1.0433.
 "We're seeing a broad-based move in risk aversion right
across markets, led by commodities," said Camilla Sutton, chief
currency strategist at Scotia Capital.
 Minor Canadian economic indicators on Thursday, building
permits for March and the Ivey Purchasing Managers Index for
April, were likely to be overshadowed by the broader sell-off
in riskier assets.
 Traders are on guard for Friday's slate of important April
employment reports from the United States and Canada.
 Market players in both the currency and bond markets were
also focused on European Central Bank President Jean-Claude
Trichet to see if he will point to a rate rise in June by
mentioning "strong vigilance" in a news conference to be held
later in the session.
 Canada's interest rates are also set to rise sometime this
year, although estimates on the timing has left the market
somewhat divided.
 Investors have fully priced in an interest rate hike for
October, according to a Reuters calculation of yields on
overnight index swaps. An interest rate poll of primary dealers
on April 19 showed more primary dealers expect a rate hike in
July. [CA/POLL] BOCWATCH
 Canadian government bond prices were mildly firmer on
Thursday as stock futures suggested a weaker open, while the
key jobs figures loomed and kept price movements minimal.
 The two-year bond CA2YT=RR was up 2 Canadian cents to
yield 1.675 percent, while the 10-year bond CA10YT=RR rallied
17 Canadian cents to yield 3.195 percent.
 (Editing by Padraic Cassidy)