CANADA FX DEBT-C$ slips lower amid euro volatility

Fri Apr 15, 2011 5:18pm EDT
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   * C$ softens to C$0.9601, or $1.0416
 * Bonds firmly higher across curve
 * European debt, non-domestic factors in focus
 (Updates with details, adds comments)
 By Solarina Ho
 TORONTO, April 15 (Reuters) - The Canadian dollar weakened
marginally against the U.S. dollar on Friday, but remained
within a narrow range as the spotlight was directed on
sovereign debt fears in Europe.
 Euro-zone debt concerns warred with expectations of a rate
hike by a hawkish European Central Bank, with volatility in the
euro heightened on Friday by a ratings downgrade on Ireland to
just above "junk" status. [FRX/] [ID:nLDE73E0DU]
 "It's more of a story of what's going on outside of
Canada," said Shaun Osborne, chief currency strategist at TD
Securities, noting that the underlying trend was still toward a
higher Canadian dollar, even if it was not significantly higher
than current levels.
 "It's a bit of a range trade. There's probably a short-term
bias for a bit of a correction in the rundown for USD/CAD in
the last month or so. It probably means no more than a bounce
to C$0.9700 or C$0.9750."
 The currency CAD=D4 finished the week at C$0.9601 to the
U.S. dollar, or $1.0416, down slightly from Thursday's North
American finish of C$0.9598 to the U.S. dollar, or $1.0419.
That followed a low of C$0.9650, or $1.0363 touched earlier in
the session.
 "I don't think foreign investors are really overly
concerned to be honest," said David Bradley, director of
foreign exchange trading at Scotia Capital.
 "It feels as though with USD/CAD, anytime we test above
C$0.9650 it seems there's plenty of selling interest. I think
there's still a lot of sovereign interest to buy Canadian
dollars out there as well."
 The commodity-linked Canadian dollar was still finding
support as oil prices surged on improved U.S. consumer
confidence and easing concerns over rising fuel costs. [O/R]
 With next week's domestic inflation data not expected to be
a major driver for the currency -- the core inflation outlook
remains low -- analysts expect the Canadian dollar to react to
big U.S. dollar trends and a risk appetite that could be
influenced by outside factors including the European debt
crisis, equity markets and commodity prices.
 Canadian government bond prices were firmly higher across
the curve, shadowing movement in U.S. Treasury prices.
Investors were increasingly bullish on the near term outlook,
helped by still-benign inflation on both sides of the border.
 The two-year bond CA2YT=RR climbed 14 Canadian cents to
yield 1.746 percent, while the 10-year bond CA10YT=RR gained
39 Canadian cents to yield 3.308 percent.
 (Reporting by Solarina Ho; editing by Rob Wilson)