CANADA FX DEBT-C$ drifts lower; eyes equities for direction

Thu Aug 12, 2010 8:19am EDT
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 * C$ slightly lower at 95.52 U.S. cents
 * Bond prices mostly flat
 By Claire Sibonney
 TORONTO, Aug 12 (Reuters) - The Canadian dollar edged
slightly lower against the greenback on Thursday morning
following a sharp sell-off triggered by growing doubts over the
outlook for the global economy.
 Global stock markets, which tend to influence the direction
of the Canadian currency, were mixed as Asian stock markets
fell to a near-three week low while European shares and New
York futures were relatively flat. [MKTS/GLOB]
 "(The Canadian dollar) will take its cue from the broader
market sentiment, which is biased in favor of risk aversion at
the moment," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
 "The market has been buying the dollar and the Swiss franc
this morning so Canada's lack of major reaction has actually
seen it pick up on most crosses."
 Wednesday's flight from riskier assets was prompted by
fears about the U.S. economy in particular showing signs of
stumbling, which earlier in the week prompted the U.S. Federal
Reserve to announce steps to hold down borrowing costs.
 A spate of data from China has also confirmed its rapid
imports and factory output growth to be slowing.
 At 8:01 a.m. (1201 GMT), the currency CAD=D4 was at
C$1.0469 to the U.S. dollar, or 95.52 U.S. cents, down from
Wednesday's finish at C$1.0453 to the U.S. dollar, or 95.67
U.S. cents.
 "There are a number of influences that are somewhat
conflicted in terms of where to push the Canadian dollar in
terms of its breakout. A week ago it was below C$1.02 and now
it's looking at potentially trading above C$1.05," said Spitz.
 Piercing C$1.05, he added, could send the Canadian currency
as weak as C$1.0587, a level last seen on July 20.
 "At the moment, given the global backdrop, it appears as
though the Canadian dollar is likely headed for additional
weakness but that could easily change tomorrow in the event
that (U.S.) CPI and retail sales exceed expectations."
 With no major Canadian economic releases scheduled for the
day, investors may take some direction from data on U.S.
initial jobless claims and trade price indices.
 Canadian bond prices were also little changed.
 The two-year bond CA2YT=RR was up half a Canadian cent to
yield 1.342 percent, while the 10-year bond CA10YT=RR lost 12
Canadian cents to yield 2.984 percent.
 (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)