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

Mon Mar 9, 2009 4:42pm EDT
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* C$ breaches key level, hits lowest point since Sept 2004

* 12.3 pct drop in Canadian housing starts hits currency

* Bonds eye flood of U.S. government debt this week (Updates to close)

By Ka Yan Ng

TORONTO, March 9 (Reuters) - The Canadian dollar fell to its lowest level versus the U.S. dollar since September 2004 on Monday 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 -- piercing a key level it had brushed up against several times last week -- shortly after a report said Canadian housing starts fell 12.3 percent in February.

Housing starts fell 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's essentially riding the risk aversion wave downwards and the weaker than expected housing starts report didn't help," said Sal Guatieri, senior economist at BMO Capital Markets.   Continued...