CANADA FX DEBT-C$ falls on global debt worry, pricked by BoC

Tue Dec 8, 2009 5:08pm EST
 
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 * Canadian dollar falls to 93.99 U.S. cents
 * Bank of Canada hold rates steady, repeats rate promise
 * Short-term bonds gain in flight to safety
 (Updates to close)
 By Ka Yan Ng
 TORONTO, Dec 8 (Reuters) - The Canadian dollar fell against
a broadly stronger U.S. currency on Tuesday, pricked by the
Bank of Canada's little changed view on the economy, but
wounded by global credit concerns.
 Appetite for risk began to wane in overnight markets after
credit agency Fitch cut Greece's credit rating and as concerns
about Dubai's debt woes resurfaced, keeping the U.S. dollar
buoyant as a safe haven. [ID:nGEE5B71A1] [ID:nWNA9534] [FRX/]
The Bank of Canada reiteration on Tuesday that it would
leave its benchmark interest rate unchanged until mid 2010,
produced only a ripple in the Canadian dollar's wave of
decline.
 "We're in an environment of risk aversion," said Matthew
Strauss, senior currency strategist at RBC Capital Markets.
 "The Bank of Canada, from a market perspective, turned out
to be a nonevent. The minor changes (in its statement) were
very much expected," he said.
 The Canadian dollar finished at C$1.0639 to the U.S.
dollar, or 93.99 U.S. cents, down from Monday's finish at
C$1.0529 to the U.S. dollar, or 94.98 U.S. cents.
 It dropped to C$1.0600 to the U.S. dollar, or 94.34 U.S.
cents, just after the central bank made its announcement from
about C$1.0572, or 94.59 U.S. cents, just before the statement.
The currency later fell as low as 93.70 U.S. cents, its lowest
point in more than a week.
 Analysts attributed the decline after the interest rate
announcement to disappointment that recent strong economic data
did not prod the Bank of Canada into taking a more hawkish view
on rates.
 Data on Friday showed Canada's economy added five times
more jobs than expected in November. [ID:nN04141170]
 The Bank of Canada dampened any expectations of an early
rate hike even though it said it sees economic recovery
gathering momentum in coming quarters. [ID:nN08193566]
 "Some people maybe were thinking with the strong employment
data we saw on Friday (the Bank of Canada) would sound more
hawkish," said Camilla Sutton, currency strategist at Scotia
Capital.
 Lower commodity prices also undermined the currency. The
price of oil, a key Canadian export, fell below $73 a barrel on
Tuesday, extending losses from the previous day, while gold was
also under pressure. [O/R] [GOL]
 SHORT TERM BONDS GAIN
 Short Canadian bond prices rose as money flowed out of
equities and as Canadian interest rates looked to stay low for
some time.
 Toronto's main stock index slid to its lowest level in more
than a week, while U.S. stock indexes fell on concerns about
the outlook for a global recovery, putting the shine back on
safer instruments such as government debt.
 The two-year Canadian government bond CA2YT=RR rose 4
Canadian cents to C$100.09 to yield 1.206 percent. The 10-year
bond CA10YT=RR fell 20 Canadian cents to C$103.60 to yield
3.304 percent.
 (Additional reporting by Jennifer Kwan; editing by Peter
Galloway)