CANADA FX DEBT-C$ recovers to trade flat, China rate talk weighs

Wed Nov 17, 2010 8:08am EST
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* C$ unchanged at 97.83 U.S. cents

* Canadian bond prices flat to lower as equities perk up

TORONTO Nov 17 (Reuters) - Canada's dollar was flat against the U.S. currency, recovering from a fresh near-three week low but weighed by soft commodity prices on Wednesday morning.

The Canadian dollar fell to its weakest since Oct. 28 at C$1.0260 to the U.S. currency, or 97.47 U.S. cents, as oil dropped on renewed worries China may increase interest rates to stave off inflation. Other key commodities, such as copper, also retreated. [O/R][MET/L]

At 8 a.m. (1500 GMT), the Canadian dollar CAD=D4 was at C$1.0222 to the U.S. dollar, or 97.83 U.S. cents, exactly the same as Tuesday's close.

"I think it's going to underperform because of depressed commodity prices, which is all directly (related) to China," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange. He put the Canadian dollar's daily range between C$1.0170-C$1.0260.

"Even though equity markets may recover a bit, I think the China tightening rumors will keep commodities soft and that will keep Canada on the defensive."

Canada's dollar shed more than a cent against the greenback on Tuesday, continuing a slide that has been largely at the hands of external influences.

The Canadian dollar hit parity with the U.S. dollar earlier this month and made several attempts to hold there, but has repeatedly bounced from the one-for-one level on mounting speculation of a Chinese rate hike.   Continued...