CANADA FX DEBT-C$ drops to lowest level since 2004

Mon Mar 9, 2009 10:10am EDT
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* C$ breaches key level, hits lowest point since Sept 2004

* Canadian housing starts drop 12.3 percent

* Bonds eye flood of U.S. government debt this week

TORONTO, March 9 (Reuters) - The Canadian dollar fell to its lowest level versus the U.S. dollar since September 2004 on Monday morning after data showed a sharper than expected decline in new home construction in Canada.

The Canadian currency fell as low as C$1.3066 to the U.S. dollar, or 76.53 U.S. cents, shortly after a report said Canadian housing starts fell 12.3 percent in February to a seasonally adjusted annualized rate of 134,600 units from 153,500 in January. [ID:nN09444629]

While the weak housing data was a major catalyst driving the currency lower, the fall also came against a backdrop of a renewal of risk aversion in the market.

"It was a little bit a of delayed reaction to the housing starts," said George Davis, chief FX technical analyst at RBC Capital Markets.

"It basically hit some stop/loss orders and had some momentum players buy dollar/Canada on the breakout."

At 9:53 a.m. (1453 GMT), the Canadian currency was at C$1.3023 to the U.S. dollar, or 76.79 U.S. cents, down sharply from C$1.2865 to the U.S. dollar, or 77.73 U.S. cents, at Friday's close.   Continued...