CANADA FX DEBT-C$ falls with oil, flat equities

Fri Jun 12, 2009 8:18am EDT
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By Jennifer Kwan

TORONTO, June 12 (Reuters) - The Canadian dollar pulled back against the U.S. dollar on Friday morning as the price of commodities sagged, equities were largely muted and the greenback recovered after losses this week.

At 7:45 a.m. (1145 GMT), the Canadian dollar was at C$1.1248 to the U.S. dollar, or 88.90 U.S. cents, down from C$1.1032 to the U.S. dollar, or 90.65 U.S. cents, on Thursday.

The currency was pressured by oil prices CLc1, which eased to below $72 a barrel after a three-day rally and on a firmer U.S. dollar, which climbed on profit-taking. [ID:nLC158279] [FRX/]

Also, world stocks were flat on Friday ahead of a G8 finance ministers' meeting, with U.S. stock index futures pointing to a lower open. [ID:nN12541207]

"It kind of feels to me it's one of those days where everything that is risk adverse is going to be the play," said David Bradley, director of foreign exchange trading Scotia Capital.

Canada is a major exporter of oil and other commodities so the currency is typically swayed by price movements in those assets, and recently the currency also has been partly guided by equity markets.

Higher commodity prices and stronger investor confidence have helped the Canadian dollar rise about 18 percent against the greenback since early March.

That rally prompted Bank of Canada governor Mark Carney to reiterate the central bank's concerns on Thursday that if the rapid rise in the currency is sustained it could hinder economic recovery.

"The Bank is not comfortable with a stronger Canada, generally, because it impacts the export sector," said Bradley, noting "the rhetoric is probably weakening" the Canadian unit.

Canadian bond prices were flat to higher across the curve, following the U.S. Treasury market which rose in Europe on Friday, extending gains made in the previous session after a solid auction of 30-year bonds. [ID:nLC488020] (Reporting by Jennifer Kwan; Editing by Chizu Nomiyama)