CANADA FX DEBT-C$ drops steeply on soft data, Greek worry

Wed Jun 15, 2011 4:38pm EDT
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   * C$ falls to C$0.9813 to the U.S. dollar, or $1.0191
 * Drops as low as C$0.9829, lowest level since June 3
 * Bonds mostly firmer as risk-off sentiment returns
 * Canada two-year bond auction nets decent demand
 (Updates to close)
 By Ka Yan Ng
 TORONTO, June 15 (Reuters) - The Canadian dollar tumbled
more than a penny to its lowest point in 1-1/2 weeks 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.
 Falling in tandem with stock markets and commodity prices,
the Canadian dollar dropped as much as 1.47 cents from the
previous close to C$0.9829 to the U.S. dollar, or $1.0174, its
lowest 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 another
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 manufacturing sales
slipped 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]
 Euro zone finance ministers failed to agree on 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]
 "It's becoming increasingly difficult to get a handle on
gauging the temperature of global risk," said Jack Spitz,
managing director of foreign exchange at National Bank
 Bank of Canada Governor Mark Carney gave no clear signal
the bank was prepared to raise its benchmark interest rates any
time soon to address housing prices that are now 13 percent
above their pre-crisis peak. He was speaking in Vancouver on
the country's housing market. [ID:nN15199122]
 The currency CAD=D4 closed at C$0.9790 to the U.S.
dollar, or $1.0215, down from Tuesday's North American finish
of C$0.9689 to the U.S. dollar, or $1.0321.
 The interest rate-sensitive two-year bond CA2YT=RR jumped
16 Canadian cents to yield 1.414 percent, while the 10-year
bond CA10YT=RR gained C$1.01 to yield 2.951 percent.
 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 Peter