CANADA FX DEBT-C$ dragged lower by weak U.S. data; bonds rally

Thu Jul 15, 2010 4:46pm EDT
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* C$ ends at 96.26 U.S. cents

* Weak U.S. data raises concerns about recovery

* Bonds gain in risk aversion play (Updates to close, adds quote)

By Jennifer Kwan

TORONTO, July 15 (Reuters) - The Canadian dollar touched its lowest level in nearly a week against the greenback on Thursday, hit by U.S. data that fueled worries about the economic health of Canada's biggest trading partner.

Investor sentiment soured after a gauge of factory activity in New York state fell sharply and a third monthly drop in wholesale prices in June fueled worries about deflation. [ID:nEAH104F00] [ID:nN15196157]

The currency fell to C$1.0443 to the U.S. dollar, its lowest level since July 9, as the U.S. data sparked a broader selloff in riskier assets, sending U.S. Treasury bonds higher and weighing on global equities -- though Toronto's main stock index .GSPTSE ended 1 percent higher thanks to a late rally [.TO].

"(It's) worries over what's happening with the U.S. in terms of weak data, a weak equity market. I guess the question is, is that going to have an effect on Canada and slow down the Canadian economy," said Steve Butler, director of foreign exchange trading at Scotia Capital.

"That's really the biggest fear right now."   Continued...