CANADA FX DEBT-C$ sinks further on euro zone crisis fears

Thu May 6, 2010 8:01am EDT
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 * Low of C$1.0408 to the US$, or 96.08 U.S. cents,
 * Oil prices hover around $80 a barrel
 * Bonds slightly weaker across curve
 By Jennifer Kwan
 TORONTO, May 6 (Reuters) - The Canadian dollar fell against
its U.S. counterpart on Thursday to touch a 9-week low as fears
that Greece's debt crisis may spread to other euro-zone
countries battered investor confidence.
 Canada's dollar touched a low of C$1.0408 to the U.S.
dollar, or 96.08 U.S. cents, its weakest level since March 2,
as world shares fell and the euro touched a 14-month low on
escalating fears the Greece's debt crisis could sweep other
euro zone states. [MKTS/GLOB] [FRX/]
 "We have ongoing focus with what's going on in the euro
zone," said David Watt, senior currency strategist at RBC
Capital Markets.
 Watt added another key area of focus on Thursday will be a
meeting of the European Central Bank, which is expected to
leave interest rates unchanged. However, market watchers will
be closely watching any commentary around the Greece's debt
crisis, which saw deadly riots in Athens on Wednesday and
pressure building on Spain, Portugal and others.
 At 7:35 a.m. (1135 GMT), the Canadian dollar CAD=D4 was
at C$1.0330 to the U.S. dollar, or 96.81 U.S. cents, down from
Wednesday's finish at C$1.0297 to the U.S. dollar, or 97.12
U.S. cents.
 "We'll sort of wait and see how market sentiment develops
throughout the day, specifically on equity markets," said
 "Are people prepared to today go through a period of
reflection or are we going to be selling equities and selling
risk again, which would catch the Canadian dollar as well."
 But the commodity-linked currency could recoup some of it
s recent losses, if U.S. stocks move higher. Stock index
futures turned negative on Thursday morning after previously
pointing to a higher open. [.N]
 The currency could be supported by the price of crude oil,
a key Canadian export, which hovered near $80 a barrel on
Thursday. Oil had hit a six-week low as fears that Greece's
economic crisis may spread to other European nations raised
uncertainty over future global energy demand. [O/R]
 Despite the powerful influence of external factors, a
Reuters poll released on Wednesday forecast that the Canadian
dollar will remain near parity with the greenback for at least
the next six months, but will weaken off a year from now
 Canadian government bond prices were lower across the curve
on Thursday alongside U.S. Treasuries, which fell in Europe in
part on profit-taking.
 U.S. Treasuries tracked euro zone benchmark Bunds, which
dipped on profit-taking and investor relief after a smooth
Spanish bond sale eased pressure in the currency bloc's debt
crisis. [US/]
 The two-year Canadian government bond CA2YT=RR sagged 2
Canadian cents to C$99.24 to yield 1.879 percent, while the
10-year bond CA10YT=RR fell 15 Canadian cents to C$99.50 to
yield 3.560 percent.
 (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)