TORONTO (Reuters) - The Canadian dollar fell 0.7 percent against the U.S. dollar on Monday as fears that the global economic slowdown will hobble Canada's economy trumped a string of would-be positives for the currency, including another piece of stellar housing data.
Domestic bond prices rose as investors sought the safety
of government debt amid a stock market sell-off.
The Canadian currency closed at US$1.0033, valuing a U.S. dollar at 99.67 Canadian cents, down from US$1.0105, or 98.96 Canadian cents to the U.S. dollar, at Friday's close.
The Canadian dollar traded within a range of US$1.0146, valuing a U.S. dollar at 98.56 Canadian cents, and US$1.0016, valuing a greenback at 99.84 U.S. cents.
The currency initially moved rose after morning data showed that February housing starts rose 15.4 percent to a seasonally adjusted annualized rate of 256,900 units, well above consensus expectations of analysts who called for 202,000 starts.
Another positive factor was news late Friday that another hurdle was cleared in the C$34.8 billion buyout of Canada's biggest telecoms company, BCE Inc, after the Quebec Superior Court gave the deal its stamp of approval.
"If that deal goes through, it will provide a lot of Canadian dollar buying," said Camilla Sutton, currency strategist at Scotia Capital.
And crude oil prices surged to a record high over $108 a barrel. Canada is a major oil producer, and its currency often rises when oil prices rise.
But in the context of slowing global growth and a U.S. economy that many say is already in recession, Sutton said higher energy and non-energy commodity costs are set to ramp up inflation and further inhibiting growth.
The bottom three performers of the major currencies on Monday were the Canadian, New Zealand and Australian dollars, all commodity-linked currencies.
Canadian bond prices rose on a flight to quality as credit market concerns weighed on North American stock markets.
"What's of concern is systemic risk to the financial system," said Sheldon Dong, fixed income strategist at TD Waterhouse Private Investment.
"No one can estimate how bad the damage is and that's the problem. Everyday you get anecdotal evidence of something else that's gone wrong."
Stocks sold off and bond rose after rumors that a Wall Street firm was facing liquidity issues. That prompted the chairman of the executive committee of Bear Stearns BSC.N to say the rumors were "totally ridiculous," but investors remained on the defensive.
The two-year bond climbed 4 Canadian cents to C$102.85 to yield 2.543 percent. The 10-year bond rose 29 Canadian cents to C$103.73 to yield 3.521 percent.
The yield spread between the two- and 10-year bond was 97.2 basis points, down from 98.6 points at the previous close.
The 30-year bond added 50 Canadian cents to C$116.39 to yield 4.039 percent. In the United States, the 30-year Treasury yielded 4.467 percent.
The three-month when-issued T-bill yielded 2.40 percent, down from 2.47 percent at the previous close.
Editing by Janet Guttsman