CANADA FX DEBT-Risk aversion knocks down C$, bonds rally

Thu Mar 5, 2009 5:16pm EST
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* Canadian dollar weakens as risk aversion returns

* BoE, ECB cut interest rates; see weak growth

* Bonds rise on equities slide, BoE asset buying program (Adds details)

By Ka Yan Ng

TORONTO, March 5 (Reuters) - The Canadian dollar fell on Thursday as the prospect of sustained global economic weakness reignited risk aversion plays and boosted safe haven flows to the U.S. dollar.

The Canadian dollar finished at C$1.2884 to the U.S. dollar, or 77.62 U.S. cents, down from C$1.2754, or 78.41 U.S. cents, at Wednesday's close.

The Canadian dollar rallied more than 1 U.S. cent on Wednesday as investors bought up riskier assets, spurred partly by expectations that China would introduce new stimulus measures.

But it handed back those gains on Thursday as China said it would ramp up deficit spending this year but did not announce an expansion of the country's two-year economic stimulus plan as the market had hoped. [ID:nSP395150].

This sent global stock markets lower. Stocks were hit again when auditors at General Motors warned of possible bankruptcy at the automaker.   Continued...