CANADA FX DEBT-C$ undercut by soft commodities, risk sentiment

Fri Jun 10, 2011 4:55pm EDT
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   * C$ at C$0.9783 to the U.S. dollar, or $1.0222
 * Global economic worries offset healthy jobs data
 * Bond prices mostly higher as soft equities support
 (Adds analyst comment, updates to close)
 By John McCrank
 TORONTO, June 10 (Reuters) - The Canadian dollar softened
against a firmer greenback on Friday, paring earlier gains
spurred by healthy domestic jobs data, as commodity prices
unraveled and concerns about the global economy weighed.
 U.S. crude fell 2.64 percent to settle below $100 a barrel
as supply concerns eased on news that Saudi Arabia was offering
more oil to Asian refiners. [O/R]
 Oil prices were further pressured by a broad-based flight
to safety over concerns that the global economy is stalling,
which helped support the U.S. dollar.
 "It's general U.S. dollar strength across the board and
we've been lumped into that," said Shane Enright, executive
director, foreign exchange sales at CIBC World Markets.
 Investors also dumped the euro over a lack of clarity on
financial assistance for debt-ridden Greece, giving extra fuel
to the U.S. currency. [FRX/]
 The stronger greenback put more pressure on commodities,
which are generally priced in U.S. dollars, helping send the
Reuters-Jefferies CRB index -- a basket of 19 commodities --
down 1 percent. [.CRB]
 Canada's economy relies heavily on resource exports and its
currency is affected by swings in their prices.
 Gold fell almost 1 percent for its biggest one-day decline
in a month, weighed down by the greenback, and copper dropped
to its lowest level since late May after disappointing import
data from China hurt investor sentiment. [GOL/][MET/L]
 The Toronto Stock Exchange, stacked with commodity
producers and exporters, ended the day down 1.3 percent, in
line with big drops in global equity markets. [MKTS/GLOB]
 Enright said that too was hurting Canada's currency, as
asset managers holding non-Canadian assets that are
currency-hedged adjust down the compensating currency
 "They have to buy back some of those currencies and as a
result, sell the Canadian dollar," he said.
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9783 to the U.S. dollar, or $1.0222, down from
Thursday's close at C$0.9731 to the U.S. dollar, or $1.0276.
 Early in the session, the currency had firmed to C$0.9711
to the U.S. dollar, or $1.0298 -- its strongest level since
June 1 -- following a better than expected domestic employment
 The unemployment rate fell to 7.4 percent in May from 7.6
percent as 22,300 jobs were added, marked by a solid shift
toward full-time, private-sector employment. [ID:nN10172943]
 That was slightly better than the 20,000 jobs expected by
analysts, who also forecast the unemployment rate would remain
 But the currency was unable to hold onto its gains as the
data was not strong enough to influence monetary policy, said
Michael Gregory, senior economist at BMO Capital Markets.
 "I don't think it changes anything in terms of the Bank of
Canada policy at all," he said.
 A Reuters poll of primary dealers on May 31 showed the bank
is expected to raise interest rates in September. [CA/POLL]
 Canadian bond prices were mostly higher as worries about
the global economic recovery and equity market weakness sent
investors toward lower-risk government debt.
 The two-year bond CA2YT=RR was down 1 Canadian cent to
yield 1.445 percent, while the 10-year bond CA10YT=RR added
26 Canadian cents to yield 3.007 percent.
 (Additional reporting by Solarina Ho, Editing by Jeffrey