CANADA FX DEBT-C$ falls as Goldman charges scare off risk

Fri Apr 16, 2010 5:14pm EDT
 
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 * Ends at C$1.0132 to the US$, or 98.70 U.S. cents
 * Touches low of C$1.0165, or 98.38 U.S. cents
 * Markets rattled by Goldman Sachs fraud charges
 * Investors await Bank of Canada for direction
 * Bond prices move higher across curve
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, April 16 (Reuters) - The Canadian dollar closed a
cent lower against the U.S. currency on Friday as investors
fled risk amid a global stocks rout after regulators charged
U.S. investment bank Goldman Sachs (GS.N: Quote) with fraud.
 The currency fell as low as C$1.0165 to the U.S. dollar, or
98.38 U.S. cents, as investors scampered to traditional
safe-haven assets on news that the U.S. Securities and Exchange
Commission charged has 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.
 The Canadian dollar CAD=D4 finished at C$1.0132 to the
U.S. dollar, or 98.70 U.S. cents, down from Thursday's finish
of C$1.0033 to the U.S. dollar, or 99.67 U.S. cents.
 Also weighing on market sentiment were disappointing
earnings from several big names including Google Inc (GOOG.O: Quote),
while the euro dropped on worries about Greece's debt crisis.
[MKTS/GLOB] The U.S. dollar and yen advanced strongly on Friday
in the flight to safety. [FRX/]
 The Canadian currency was also hurt by data that showed
domestic manufacturing sales rose less than expected in
February, up 0.1 percent from January. Analysts surveyed by
Reuters had forecast a 0.8 percent increase. [ID:nN16446129]
 The stronger dollar and slide in equities om the Goldman
news pushed down the price of oil, a major Canadian export,
while gold prices were also weaker. [O/R] [GOL/]
 Before the Goldman news, market watchers had expected the
Canadian dollar to drift higher ahead of the Bank of Canada's
policy announcement next week. The market is looking for clues
from the bank on the timing of an increase in its key interest
rate from the current low 0.25 percent level.
 Most of Canada's primary securities dealers predicted in a
Reuters poll on Thursday that the bank would wait until July to
raise interest rates as the high-flying Canadian dollar gives
it some breathing room by providing a tightening mechanism for
the economy.  [ID:nN15207373]
 The central bank has pledged to keep rates at the current
low level until the end of June, so long as inflation remains
in check. Higher interest rates normally draw investment and
push up a currency.
 "If they drop the conditional commitment, which we don't
expect, that would be a pretty clear signal that June's in the
crosshairs," said Mark Chandler, head of Canadian fixed income
and currency strategy at RBC Capital Markets. [ID:nN15256700]
 BONDS EDGE HIGHER
 Canadian bond prices rose across the curve as money drained
out of equity markets and flowed into safe-haven bonds. [US/]
"It's a very correlated move," said Scotia Capital's Tihanyi.
 The two-year government bond CA2YT=RR climbed 14 Canadian
cents to C$99.34 to yield 1.861 percent, while the 10-year bond
CA10YT=RR rose 33 Canadian cents to C$100.56 to yield 3.677
percent.
 Canadian government bonds mostly underperformed U.S.
issues, with the 10-year yield 9.3 basis points below its U.S.
counterpart, compared with around 12 basis points the previous
session.
 (Additional reporting by Ka Yan Ng; editing by Peter
Galloway)