CANADA FX DEBT-C$ slips lower on euro, China concerns

Mon Jan 10, 2011 5:54pm EST
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   * C$ ends at C$0.9932 to the U.S. dollar, or $1.0068
 * Higher oil helps currency pare early losses
 * Bonds firms across curve
 By Solarina Ho
 TORONTO, Jan 10 (Reuters) - The Canadian dollar slipped
against the greenback on Monday, as concerns over the euro and
China outweighed firmer oil prices.
 The euro recovered some of its losses after sinking to
four-month lows against the U.S. dollar over resurgent worries
about sovereign debt in the region. [FRX/]
 China's trade surplus fell 6 percent to $183 billion last
year, evidence it was making progress on efforts to rebalance
its economy and cutting reliance on exports. [ID:nTOE709033]
 "That's just reflecting broad-based U.S. dollar strength,"
said TD Securities' senior macro strategist, David Tulk.
 "We're a little bit concerned about conditions in Europe,
as well as some evidence the Chinese economy is slowing a
little bit. Their exports were weaker than expected, so I think
the Canadian dollar is being caught a little bit in the
cross-fire here."
 The Canadian dollar CAD=D4 finished at C$0.9932 to the
U.S. dollar, or $1.0068, trading above parity for a tenth
straight session, but down from Friday's North American close
of C$0.9918 to the U.S. dollar, or $1.0083.
 "It's actually been a bit of a volatile day," said Sacha
Tihanyi, a currency strategist at Scotia Capital.
 "It's really a moderate day for the Canadian dollar,
considering the fact that oil prices had fluctuated a little
bit ... but are generally up on the day."
 The price of oil, a key Canadian export, climbed more than
1 percent after a leak shut an Alaskan pipeline that carries 12
percent of U.S. crude output. [O/R]
 "That has managed to let the Canadian dollar rebound a
little bit relative to some of the other currencies insofar as
it compensates a little bit of the concern over Europe for
example," said Tulk.
 Cautionary comments from the Bank of Canada also held the
currency in check. The central bank's deputy governor, Agathe
Cote, said on Monday the weakening Canadian housing market
could have a "sizable spillover" effect on other parts of the
economy and that Canadian credit was still growing faster than
income. [ID:nN10280617]
 However, the central bank also said that Canadian companies
were optimistic about the economic outlook for the next 12
months even though they expect only modest growth. Oil and
mining firms were more upbeat about their sales expectations.
 The firmer oil prices and the central bank's positive
business outlook helped the currency pull away from a session
low of C$0.9985 to the U.S. dollar, or $1.0015. It hit a
session high of C$0.9911 to the U.S. dollar, or $1.0090.
 Tihanyi saw topside resistance at around C$0.9995 and
support at C$0.9900.
 Canadian bond prices were slightly higher across the curve
as investors concerned about European debt levels sought the
relative safety of government bonds. [US/]
 "It's a pretty small move all things considered. But on the
margin people are a little bit uncomfortable with the
conditions in the global economy so they're seeking the safety
of bonds currently," said Tulk.
 The two-year bond CA2YT=RR was flat to yield 1.711
percent, while the 10-year bond CA10YT=RR added 5 Canadian
cents to yield 3.177 percent.
 (Reporting by Solarina Ho; editing by Rob Wilson)