CANADA FX DEBT-C$ weakens as oil, Toronto equities slide

Wed Jul 8, 2009 4:52pm EDT
 
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 * C$ finishes at 85.65 U.S. cents
 * 4 percent drop in oil prices helps pull C$ to 7-week low
 * Bond prices higher across curve as TSX drops
 (Adds details)
 By Jennifer Kwan
 TORONTO, July 8 (Reuters) - The Canadian dollar weakened
and touched a seven-week low against the U.S. currency on
Wednesday, pressured by sliding oil and equity prices as
investors questioned the pace of economic growth.
 The currency peaked at C$1.1587 to the U.S. dollar and then
fell to C$1.1720, its lowest level since May 18, as a selloff
in the resource-heavy Toronto Stock Exchange composite index
.GSPTSE intensified amid tumbling commodity prices. The stock
index fell for a third straight session. [ID:nN08409697]
 As well, the yen had its biggest jump in months against a
range of currencies on Wednesday on safe-haven buying spurred
by renewed concerns about the global economy.[FRX/]
 Steve Butler, director of foreign exchange trading at
Scotia Capital, noted that the yen and the U.S. dollar
typically benefit from investor aversion to risk.
 "It has a lot to do with risk. The market is certainly
uneasy about the global economy," he said.
 The Canadian dollar finished at C$1.1676 to the U.S.
dollar, or 85.65 U.S. cents, down slightly from C$1.1661 to the
U.S. dollar, or 85.76 U.S. cents, at Tuesday's close.
 Oil dropped more than 4 percent to under $61 a barrel after
a U.S. government report showed larger than expected distillate
and gasoline inventories [ID:nN08405735] Oil settled 4.4
percent lower at $60.14 a barrel.
 "Investors are questioning whether the greenshoots are
withering on the vine," said Sal Guatieri, senior economist at
BMO Capital Markets.
 Given commodity price weakness and broader economic
concerns, market watchers said they would not be surprised to
see the Canadian dollar move through the C$1.1800 level in the
near future.
 BOND PRICES HIGHER
 Canadian bond prices were higher across the curve as money
flowed into safe government debt due to investor anxiety about
the economic outlook, Guatieri said.
 Prices were also influenced by the bigger U.S. Treasury
market, where prices rose on Wednesday following a successful
auction. [ID:nN08396034]
 The two-year Canada bond ticked up 1 Canadian cent to
C$100.16 to yield 1.164 percent, while the 10-year bond rose 55
Canadian cents to C$104.05 to yield 3.267 percent.
 The 30-year bond climbed 40 Canadian cents to C$119.90 to
yield 3.832 percent. In the United States, the 30-year Treasury
yielded 4.1706 percent.
 Canadian bonds mostly underperformed U.S. Treasuries across
the curve. The Canadian 30-year bond was 33.9 basis points
below the U.S. 30-year yield, compared with about 45 basis
points below on Tuesday.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)