CANADA FX DEBT-C$ drops to near 2-wk low on weak data, Greece

Wed Jun 15, 2011 1:25pm EDT
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   * C$ slumps to C$0.9813 to the U.S. dollar, or $1.0191
 * Falls as low as C$0.9829, lowest since June 3
 * Bonds mostly firmer as risk-off sentiment returns
 * Canada two-year bond auction nets decent demand
 (Updates to early afternoon)
 By Ka Yan Ng
 TORONTO, June 15 (Reuters) - The Canadian dollar fell hard
against its U.S. counterpart on Wednesday, pressured by weak
Canadian and U.S. data and renewed concerns that the Greek debt
crisis could escalate.
 Meantime, government bond prices rallied across the curve
in a flight to safety.
 In tandem with stock markets and commodity prices, the
Canadian dollar fell more than a penny from the previous close
to as low as C$0.9829 to the U.S. dollar, or $1.0174, its
weakest level since June 3.
 That was also not far off C$0.9850, which traders said they
were eyeing as a key level that, if broken, could spawn the
next leg of Canadian dollar weakness.
 "That's a big level for dollar/Canada," said Fergal Smith,
managing market strategist at Action Economics.
 Data on Wednesday showed the U.S. economy is facing a
troubling mix of higher prices and weak growth. Underlying U.S.
inflation rose to its highest level in nearly three years in
May, while a regional factory gauge posted a surprise
contraction this month. [ID:nN15281293]
 The picture was also soft in Canada as manufacturers saw
sales slip 1.3 percent in April, as expected, reversing much of
March's gains as the Japanese earthquake cut off supplies to
the auto industry. [ID:nN15132944]
 "Today's weak print provides a cautious reminder that the
pace of economic growth is slowing in Canada," said Mazen Issa,
a macro strategist at TD Securities in a research note.
 Euro zone finance ministers failed to agree how to make
private creditors contribute to a second bailout for Greece. A
senior Greek government source said Prime Minister George
Papandreou told the head of the conservative opposition he
would be willing to step down and make way for a national unity
government. [ID:nLDE75E0JC]
 Bank of Canada Governor Mark Carney is speaking in
Vancouver later Wednesday afternoon about the country's housing
market, with investors looking for comments on the impact of
low interest rates on household borrowing.
 Carney's comments are expected to be biased to the hawkish
side, which could support the Canadian dollar later today.
 Any comments on the Canadian dollar and whether the Bank of
Canada believes it is too strong will also be parsed.
 "As much as they don't want the Canadian dollar down here,
I think they realize there's not much they can do about it.
It's more of a global flow aspect to what's going on with the
Canadian dollar. The drivers are not really controlled
domestically," said said Darcy Browne, managing director,
capital markets trading, at CIBC, adding that a lot of money is
currently on the sidelines.
 At 1:07 p.m. (1707 GMT), the currency CAD=D4 stood at
C$0.9813 to the U.S. dollar, or $1.0191, down from Tuesday's
North American finish of C$0.9689 to the U.S. dollar, or
 The interest rate-sensitive two-year bond CA2YT=RR jumped
12 Canadian cents to yield 1.443 percent, while the 10-year
bond CA10YT=RR gained 75 Canadian cents to yield 2.981
 Canada's sale of two-year government bonds met with decent
demand, though the bid-to-cover ratio was the lowest this year.
 (Additional reporting by Solarina Ho; editing by Rob Wilson)