CANADA FX DEBT-C$ sags vs broadly stronger USD, bonds up
* C$ at 88.03 U.S. cents
* Bonds rise on weak equities
* Canada opposition gives government ultimatum (Adds details)
By Ka Yan Ng
TORONTO, June 15 (Reuters) - Canada's dollar extended its decline against the broadly firmer U.S. dollar on Monday, dragged down by slumping equity markets and commodity prices.
Market watchers were keeping an eye on Canadian politics as the opposition leader in Parliament raised the possibility of fresh elections, but it was mostly a U.S.-dollar story on Monday.
The greenback strengthened -- and the Canadian dollar flagged -- after Russia expressed confidence in the U.S. currency [ID:nN15349904] and the European Central Bank said euro-zone banks faced another $283 billion in writedowns. [ID:nN15135228]
Weakness in global equities also played a factor in pushing the Canadian currency lower and bond markets higher. Toronto's main stock index slumped more than 2 percent.
"The U.S. dollar is extremely strong across the board today. A lot of that has been driven by the weaker sentiment that we've been seeing in equity markets," said George Davis, chief technical strategist at RBC Capital Markets.
"In turn, commodities are tracking equity markets lower as well. Given these higher levels of risk aversion, which we haven't seen in a while, the Canadian dollar is getting hit on the back of that."
At 1:00 p.m. (1700 GMT), the Canadian dollar was at C$1.1348, or 88.12 U.S. cents, down from Friday's finish at C$1.1179 to the U.S. dollar, or 89.45 U.S. cents.
The Liberal Party said it was prepared to bring down the minority Conservative government unless it received details of planned improvements to the jobless benefits system. The opposition could call a non-confidence vote this Friday, and that could lead to Canada's fourth federal election in just over five years. [ID:nN15437772]
"It's just political posturing at this point in time but I don't think it's going to have an undue effect on the Canadian dollar," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"At this stage in the game I can't see it having a huge effect on the Canadian dollar."
Canada is a major oil producer and the currency was also pressured by a drop in oil prices CLc1 to under $70 a barrel. Oil was pushed lower as the greenback strengthened. [ID:nSIN431717]
BONDS TRACK TREASURIES HIGHER
Canadian bond prices were higher, tracking the U.S. Treasury market, which rose on Monday on a flight-to-safety bid in light of weakening equity markets.
The benchmark two-year government bond edged up 2 Canadian cents to C$99.73 to yield 1.393 percent, while the 10-year bond was up 15 Canadian cents at C$102.15 to yield 3.492 percent.
The 30-year bond climbed 40 Canadian cents to C$118.20 to yield 3.922 percent. The comparable U.S. issue yielded 4.594 percent. (Additional reporting by Jennifer Kwan and Frank Pingue; editing by Frank McGurty)
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