CANADA FX DEBT-C$ sags vs greenback; outshines euro, pound

Thu May 13, 2010 5:19pm EDT
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   * C$ closes lower at 97.99 U.S. cents
 * C$ hits multi-year highs vs euro, sterling
 * Bond prices gain across the curve
 By Claire Sibonney
 TORONTO, May 13 (Reuters) - The Canadian dollar fell
slightly against the U.S. dollar on Thursday as prices for oil
and other riskier assets were hit by soft U.S. jobs data and
worries that growth in Europe will slow, which pushed the
market towards the safe-haven greenback.
  But the Canadian currency made further gains against the
euro, rising as high as C$1.2723, or 78.60 euro cents, its
strongest level since July 2001.
 It also hit a multi-year high versus sterling at C$1.4840,
or 67.39 pence.
 "The market is seeking a non-European bid and Canada's
attributes are compelling," said Jack Spitz, managing director
of foreign exchange at National Bank Financial.
  While investors were relieved by news that heavily
indebted Spain and Portugal were taking steps to cut budget
deficits, they also feared this would slow down euro zone
growth. They fretted as well about growth risks in the British
economy. [FRX/]
  Also spoiling appetite for risk was data that showed the
number of U.S. workers filing for jobless benefits fell
slightly last week, suggesting the U.S. unemployment rate will
remain elevated even as recovery in the labor market becomes
entrenched. [ID:nN13144732]
 The commodity-linked Canadian dollary was affected by
falling oil prices, which dropped on high U.S. inventories and
the concerns about economic recovery. [O/R]
 Before Thursday, the Canadian dollar put in four sessions
of gains, supported by Canada's relatively healthy fundamentals
and a spate of data showing faster-than-expected economic
 "On a relative basis Canada looks quite good," said Mark
Chandler, head of Canadian fixed income and currency strategy
at RBC Capital Markets.
 "If the thing that markets are going to worry themselves
about right now is debts and deficits then Canada stands to do
relatively well on the currency front as a result."
  The Canadian dollar CAD=D4  finished the North American
session at C$1.0205 to the U.S. dollar, or 97.99 U.S. cents,
down from C$1.0198 to the U.S. dollar, or 98.06 U.S. cents, at
Wednesday's close. Earlier in the day, it traded as high as
98.91 U.S. cents, its highest level in more than a week, and as
low as 97.96.
 Canadian government bond prices edged higher across the
curve, following U.S. Treasuries, which rose as losses in the
euro and struggling North American stocks enhanced the allure
of safe-haven government debt.
  Price gains were limited, however, by some minor
disappointment over the results of a U.S. auction of $16
billion of 30-year bonds.
 "A poorly received auction put some pressure on bonds ...
but the dominant move in bonds late in the day was weak equity
markets," Chandler said.
 The two-year government bond CA2YT=RR was up 14 Canadian
cents to C$99.12 to yield 1.942 percent, while the 10-year bond
CA10YT=RR jumped 67 Canadian cents to C$99.87 to yield 3.516
 Canadian bonds outperformed their U.S. counterparts across
the curve. The Canadian 10-year bond yield was 2.7 basis points
below the U.S. 10-year yield, compared with 2.5 basis points
above on Wednesday.
 In new issues, the province of New Brunswick sold C$500
million ($490 million) of 10-year notes. [ID:nN13182789]
 The province of Ontario sold C$750 million of 10-year notes
in a reopening of an existing 4.2 percent issue.
 (Additional reporting by Ka Yan Ng, editing by Peter