CANADA FX DEBT-C$ tumbles on risk aversion, Goldman charges

Fri Apr 16, 2010 1:23pm EDT
 
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 * Touches low of C$1.0165 to the US$, or 98.38 U.S. cents
 * Markets rattled as Goldman Sachs charged with fraud
 * Canada's February factory sales below estimates
 * Investors await Bank of Canada for direction
 * Bonds prices move higher across curve
 (Recasts; adds quotes, details about Goldman Sachs)
 By Jennifer Kwan
 TORONTO, April 16 (Reuters) - The Canadian dollar tumbled
more than a cent against the U.S. currency on Friday as global
stocks plummeted on increased risk aversion after regulators
charged U.S. investment bank Goldman Sachs GS.N with fraud.
 The currency fell to a low of C$1.0165 to the U.S. dollar,
or 98.38 U.S. cents as investors scampered to safer assets on
news the U.S. Securities and Exchange Commission had charged
Goldman Sachs with fraud in the structuring and marketing of a
debt product tied to subprime mortgages. [ID:nN16121493]
 "It's the general market market meltdown that happened
after the Goldman Sachs news hit. That seems to be the prime
driver that has pushed equities lower, and commodities have
dropped with it," said Sacha Tihanyi, currency Strategist at
Scotia Capital.
 "Nobody knows if this is the start of something or what
could happen. Markets don't like uncertainty. That's a fairly
big dose of it," he added.
 "It's risk aversion. It introduces uncertainty."
 At 1:01 p.m. (1701 GMT), the Canadian dollar CAD=D4 was
at C$1.0148 to the U.S. dollar, or 98.54 U.S. cents, up
slightly from earlier lows. On Thursday, it finished at
C$1.0033 to the U.S. dollar, or 99.67 U.S. cents.
 Also weighing on sentiment were disappointing earnings from
Google Inc GOOG.O, while the euro dropped on worries about
Greece's debt crisis. [MKTS/GLOB]
 The U.S. dollar and yen advanced strongly on Friday on
rising risk aversion. [FRX/]
 The Canadian currency had already begun its steeper descent
after data showed domestic manufacturing sales edged less than
expected in February, gaining just up 0.1 percent.
 Analysts surveyed by Reuters had forecast a 0.8 percent
increase in factory sales in the month. [ID:nN16446129]
 Still, the manufacturing sales report reflected a broader
trend of recovery, said Millan Mulraine, an economic strategist
at TD Securities.
 "Overall, despite the disappointing headline print in
February, the rebound in Canadian manufacturing sector activity
has been nothing short of spectacular, and it is an indication
that the Canadian economy has continued to be a net beneficiary
from the recovery in global demand," he said.
 However, Mulraine noted the impact of the high-flying
Canadian dollar could become a key source of drag on activity
in the longer term.
 The price of oil slid in tandem with equity market, while
gold prices were also down. [O/R] [GOL/]
 Before the Goldman news, market watchers had expected the
Canadian dollar to drift ahead of a Bank of Canada meeting next
week. The market is looking for clues on the timing of an
increase in the key interest rate from its 0.25 percent level.
 Most of Canada's primary securities dealers predicted on
Thursday that the bank would raise interest rates in July as
the high-flying Canadian dollar gives it some wiggle room even
as the economy picks up steam. [ID:nN15207373]
 BONDS EDGE HIGHER
 Canadian bond prices rose across the curve, as money
drained out of equity markets and flowed into the safer haven
of bonds. [US/]
 "It's a very correlated move," said Scotia Capital's
Tihanyi.
 The two-year government bond CA2YT=RR rose 8 Canadian
cents to C$99.28 to yield 1.896 percent, while the 10-year bond
CA10YT=RR gained 20 Canadian cents to C$100.43 to yield 3.694
percent.
 (Editing by Rob Wilson)