CANADA FX DEBT-C$ dragged back from 13-week high

Thu Apr 16, 2009 2:44pm EDT
 
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 * C$ hits session low of 82.32 U.S. cents
 * Short-covering blamed for currency's fall
 * Bond prices flat to lower
 (Recasts, adds details)
 By Frank Pingue
 TORONTO, April 16 (Reuters) - The Canadian dollar tumbled
more than 1 U.S. cent from the 13-week high it raced to earlier
on Thursday as its move through a key level sparked a wave of
selling as traders felt it got ahead of itself.
 The Canadian currency fell to C$1.2148 to the U.S. dollar,
or 82.32 U.S. cents, by early afternoon, down from an earlier
high of C$1.1982 to the U.S. dollar, or 83.46 U.S. cents.
 At 2:20 p.m. (1820 GMT), the currency was at C$1.2121 to
the U.S. dollar, or 82.50 U.S. cents, down from C$1.2032 to the
U.S. dollar, or 83.11 U.S. cents, at Wednesday's close.
 The currency cracked the C$1.20 level early in the session
in the aftermath of data that showed Canadian factory sales
rose in February for the first time since July, thanks to a
slight rebound in the battered auto sector. [ID:nN17446129]
 But the currency's rise was short-lived as it encountered a
wave of downward pressure moments after it breached the key
level as traders appeared uncomfortable with it at such lofty
levels given its impressive rally off a four-year low last
month.
 "It felt like Canada was really forced below C$1.20 and
after the level broke it just felt like the Canada buying had
disappeared and the market was all caught long Canada, and it's
just been a bit of a chase all afternoon," said Steve Butler,
director of foreign exchange trading at Scotia Capital.
 North American equities were relatively flat, providing
little influence on the currency markets.
 "There's not much of a story elsewhere, equities are mixed
and we don't have a whole lot of data into next week," said
Shaun Osborne, chief currency strategist at TD Securities.
 Domestic bond prices were mostly lower across the curve, in
line with the slide in the bigger U.S. market.
 (Editing by Jeffrey Hodgson and Rob Wilson)