CANADA FX DEBT-C$ tumbles, bonds soar after gloomy trade data

Wed Aug 11, 2010 2:44pm EDT
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* C$ falls to 95.58 U.S. cents, holds near session low

* Bond prices soar on flight to safety

* Canada trade deficit widens; to drag on Q2 growth (Updates to late afternoon)

By Ka Yan Ng

OTTAWA, Aug 11 (Reuters) - The Canadian dollar tumbled to its lowest level in nearly three weeks against the greenback on Wednesday, while bonds surged, as a spate of disappointing indicators, including widening North American trade deficits, left investors to reassess the world economic recovery.

Canada posted a trade deficit in June of C$1.13 billion nearly four times expectations, while the U.S. monthly trade gap widened by 19 percent to $49.9 billion, the biggest shortfall since October 2008. [ID:nN15446129] [ID:nN11208864]

"It was a double whammy of bad news for the currency," said Sal Guatieri, senior economist at BMO Capital Markets.

"Canada's trade report showed a considerable widening in our trade deficit, partly because of a drop in exports, and the weak U.S. trade report will fan fears of a faltering U.S. economic recovery, which will raise concerns about further weakness in Canadian exports."

As a result, the Canadian currency, already under pressure from pessimistic outlooks from the U.S. Federal Reserve and Bank of England, as well as weak Chinese economic data, fell more than a penny after breaking a key technical level of C$1.04 early in the session, and stayed well below it.   Continued...