CANADA FX DEBT-Greek fears pull C$ to 3-month low

Thu Jun 16, 2011 10:09am EDT
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   * C$ at C$0.9866 to the U.S. dollar, or $1.0136
 * Drops as low as C$0.9899, or $1.0102
 * Bond prices firmer across curve on safe-haven buying
 By Solarina Ho
 TORONTO, June 16 (Reuters) - The Canadian dollar weakened
to its lowest level against the U.S. dollar in three months on
Thursday morning as renewed fears that Greece's debt problems
were out of control spurred a flight to safety.
 The currency -- already pressured by weak Canadian and U.S.
economic data and Greek worry on Wednesday -- extended the
previous session's losses, falling to its weakest level since
March 17 and inching closer to parity with the U.S. dollar.
 "Obviously it's been a Canada selloff ... definitely led by
what's happening in Europe. That was the catalyst for the
markets in the overnight session, leading us to a stronger U.S.
dollar across the board," said C.J. Gavsie, managing director
of foreign exchange sales at BMO Capital Markets.
 "(The Canadian dollar) is being caught up in the whole
sweep as far as (U.S.) dollar bids."
 Better-than-expected U.S. employment and housing figures
offered some relief with the Canadian currency trimming earlier
losses following the U.S. data. [ID:nN16172420]
 New claims for U.S. unemployment benefits fell last week,
while housing starts and permits for future construction rose
in May, signs that offered some hope the U.S. economy could
soon pull out of its soft patch.
 Shortly before the data was released at 8:30 a.m. (1230
GMT), the currency fell as low as C$0.9899 to the U.S. dollar,
or $1.0102.
 "That was a little bit of profit-taking from short-USD/CAD
positions ahead of the numbers. Some apprehensiveness again --
it was more taking off of positions rather than establishing
new ones," Gavsie said.
 At 9:02 a.m., the currency CAD=D4 was at C$0.9866 to the
U.S. dollar, or $1.0136, weaker than Wednesday's North American
finish of C$0.9790 to the U.S. dollar, or $1.0215. It broke
through C$0.9850, which some traders said was a key level that
could spawn another round of Canadian dollar weakness.
 Overseas, the euro hit a lifetime low against the Swiss
franc and a three-week low against the U.S. dollar. [FRX/]
 The negative sentiment on Greece was fueled by violent
protests in Athens, highlighting the political obstacles to a
second debt bailout, with Prime Minister George Papandreou
forced to reshuffle his cabinet to salvage his government after
resignations by ruling party lawmakers. [nL3E7HG0P8]
 Crude prices were slightly weaker in choppy trading, with
U.S. crude falling below $95 a barrel. Traders and analyst said
the overall trend remained downwards, adding to the
commodity-linked Canadian currency's softness. [O/R]
 "(Oil's) definitely having an impact here...A move down to
$90 a barrel warrants parity or better in terms of USD/CAD,"
Gavsie said.
 He said he expected to see the currency to fall as low as
C$0.9920 on Thursday, but also with the potential to firm to
 Canadian bond prices were stronger across the curve as
investors rushed back into low-risk assets.
 The two-year bond CA2YT=RR rose 14.4 Canadian cents to
yield 1.464 percent, while the 10-year bond CA10YT=RR added
11 Canadian cents to yield 2.941 percent.
 (Editing by Peter Galloway)