CANADA FX-C$ slips as risk plays hit by euro zone woes

Thu Nov 11, 2010 9:42am EST
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   * C$ falls to 99.82 U.S. cents
 * Touched highest level since April before falling
 * Crisis erupts in Ireland, pushing its bond spreads out
 By Claire Sibonney
 TORONTO, Nov 11 (Reuters) - The Canadian dollar softened
against the greenback on Thursday after touching its highest
level since April as fresh euro zone debt woes eroded investor
appetite for peripheral currencies.
 The yield spread between 10-year Irish and German
government bonds shot out to its widest ever as investors
remain unconvinced that Dublin will be able to carry out
drastic austerity measures to ensure it can repay its debts,
sending the euro lower against the U.S. dollar.
 The prospect of a fresh European debt crisis prompted many
investors to dump riskier assets and move their capital back
into U.S. dollars.
 "We're really being dragged around by general (U.S.) dollar
direction more than anything specifically Canadian which to a
large degree is being driven by euro/dollar," said Adam Cole,
global head of FX strategy at RBC Capital Markets.
 Cole noted that trading was light due to Canada's
Remembrance Day and U.S. Veteran's Day holidays, which have
closed bond markets.
 "Moves are really being exaggerated by the fact that most
people in North America are on holiday so liquidity is at a bit
of a premium. That's inducing a bit of volatility despite there
being very little news around."
 The Group of 20 meeting in South Korea -- which is trying
to sort out disagreements over currency policy -- produced
little market direction as leaders struggled to agree on
meaningful action to rebuild the global economy as the crisis
erupted in Ireland. [ID:nN10121378]
 At 9:20 a.m. (1520 GMT), the Canadian dollar stood at
C$1.0018 to the U.S. dollar, or 99.82 U.S. cents, down from its
finish exactly at par on Wednesday.
 Earlier the currency had been supported by reports of
strong Chinese growth, which boosted commodity prices.
Overnight, the Canadian dollar CAD=D4 hit a session high of
99.77 Canadian cents to the U.S. dollar, or $1.002, its highest
level since April.
 The day's range for the currency is expected to hold
between 99.80 Canadian cents to the U.S. dollar, or $1.002, and
C$1.01 to the U.S. dollar, or 99.01 U.S. cents, said Cole.
 "I can't really see a short-term catalyst (for parity) but
it's probably only a question of time before we do because the
fundamental backdrop in Canada is still a very strong one."
 (Reporting by Claire Sibonney; editing by Jeffrey Hodgson)