CANADA FX DEBT-C$ slips on lower oil, equity prices

Mon Jul 12, 2010 11:34am EDT
 
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 * C$ down at 96.43 U.S. cents
 * BoC survey shows business upbeat but eyeing global risk
 * Bond prices rise across curve
 (Updates to midmorning, recasts, adds quote)
 By Jennifer Kwan
 TORONTO, July 12 (Reuters) - Canada's dollar fell on Monday
morning due to weakness in oil and equity prices despite a pair
of Bank of Canada surveys that showed upbeat business
sentiment.
 The surveys showed businesses were positive in the second
quarter on future sales, investment and hiring, but their
enthusiasm was tempered by fears that global uncertainties
would hurt economic recovery. [ID:nTOE002143]
 "It does show some slowing in the momentum of the recovery
overall, but there were certainly enough positive aspects here
that the main message is that the recovery still seems to be on
solid ground at least in Canada," said Doug Porter, deputy
chief economist at BMO Capital Markets.
  The surveys, however, were not enough to keep the Canadian
currency in positive territory as weakness in oil and equity
markets -- key gauges of risk appetite -- were softer as
investors paused after last week's rallies. [.N] [.TO]
 At 11:03 a.m. (1503 GMT), the Canadian dollar CAD=D4 was
at C$1.0370 to the U.S. dollar, or 96.43 U.S. cents, down from
Friday's finish at C$1.0337 to the U.S. dollar, or 96.74 U.S.
cents.
 "In general, we had this sharp risk rally last week and
that's been fading off a bit," said David Watt, senior currency
strategist at RBC Capital Markets, referring to the Canadian
dollar's 2.8 percent rise last week.
 "Equities are fading off as well," he added.
 The Canadian currency touched a session low of C$1.0387 to
the U.S. dollar, or 96.27 U.S. cents.
 The Bank of Canada's business outlook and senior loan
officer surveys were not expected to significantly change
expectations that the bank will raise its key interest rate on
July 20.
 Yields on overnight index swaps, which trade based on
expectations for the Bank of Canada's key policy rate, showed
the market sees an 82 percent chance of a July rate
hike.BOCWATCH [CA/POLL]
   BONDS HIGHER
 Canadian bond prices advanced as investors shied away from
assets perceived to be risky.
 The two-year CA2YT=RR rose 8 Canadian cents to yield
1.671 percent, while the 10-year bond CA10YT=RR climbed 32
Canadian cents to yield 3.193 percent.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)