CANADA FX DEBT-C$ sags on renewed Europe debt fears

Mon Dec 6, 2010 4:47pm EST
 
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   * C$ closes lower at 99.47 U.S. cents
 * Bond prices track U.S. Treasuries higher
 (Updates to close; adds details, commentary)
 By Claire Sibonney
 TORONTO, Dec 6 (Reuters) - The Canadian dollar slipped
lower against its U.S. counterpart on Monday, as riskier
currencies were sold on growing doubts that European officials
would find a common approach to ease the region's debt crisis.
 Euro zone finance ministers met on Monday amid pressure to
increase the size of a 750-billion-euro ($1 trillion) safety
net for debt-stricken members in hopes of halting potential
contagion to other countries. [ID:nLDE6B40EJ]
 However, the Canadian dollar still held its own against
other major currencies as the second best performer behind the
greenback, thanks to strength in commodity markets.
  "As the week starts, the market has refocused on European
concerns," said Matthew Strauss, senior currency strategist at
RBC Capital Markets.
 "But ultimately, as the market moves into safe-haven U.S.,
it seems that the Canadian dollar benefited through
proximity."
 Prices for key Canadian exports such as oil and metals were
boosted by comments from U.S. Federal Reserve Chairman Ben
Bernanke that raised the possibility of more quantitative
easing, spurring optimism for the demand outlook.
 Bernanke, appearing on the U.S. TV news program "60
Minutes" on Sunday, said the Fed could end up buying more than
the $600 billion in U.S. government bonds it has committed to
purchase, if the economy failed to respond. [ID:nN05271909]
 The Canadian dollar closed the North American session at
C$1.0053 to the U.S. dollar, or 99.47 U.S. cents, down from
Friday's finish at C$1.0033, or 99.67 U.S. cents.
 Strauss said the area just above parity continues to
provide near term support for the U.S. dollar, followed by
C$0.9977 -- a bottom that has been unsuccessfully tested a
number of times during the last few months.
 The focus on Tuesday will be on the Bank of Canada's
interest rate announcement. While markets are pricing in next
to no chance of a move, investors will be eyeing the
accompanying statement closely.
 Strauss noted that meaningful changes to the outlook seem
unlikely in the absence of a quarterly monetary policy report,
last released in October, with the statement seen retaining its
cautious tone.
 Also on Tuesday, ministers from the 27-nation European
Union are expected to formally approve an 85 billion euro aid
package for Ireland and discuss the reform of EU budget rules,
which could set further direction for the week.
 Canadian bond prices were firmer across the curve, tracking
U.S. Treasuries, where debt prices rallied on Bernanke's
comments and as euro zone jitters sparked a safe-haven bid.
[US/]
 The two-year Canada bond CA2YT=RR was up 14 Canadian
cents at to yield 1.562 percent, while the 10-year bond
CA10YT=RR gained 50 Canadian cents to yield 3.129 percent.
 (Reporting by Claire Sibonney; editing by Rob Wilson)