CANADA FX DEBT-C$ nears 1-mth low as risk aversion mounts

Tue Feb 17, 2009 9:36am EST
 
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 * C$ skids to 78.89 U.S. cents, lowest level since Jan. 22
 * Risk appetite dips on fears of prolonged global slowdown
 * Bonds prices rebound as Monday's weak data sets tone
 (Adds details and comments)
 TORONTO, Feb 17 (Reuters) - The Canadian dollar fell to its
lowest level in almost a month against the U.S. dollar on
Tuesday, hurt by rising risk-aversion as fears mounted of a
protracted global economic downturn.
 There was little home-grown news to drive the Canadian
dollar early on Tuesday and it was being hit by wariness about
the health of Europe's banks, the falling price of crude oil,
and uncertainty ahead of a deadline for car giants to submit
turnaround plans.
 At 9:15 a.m. (1415 GMT), the Canadian dollar was at
C$1.2660 to the U.S. dollar, or 78.99 U.S. cents, down sharply
from C$1.2341 to the U.S. dollar, or 81.03 U.S. cents, at
Friday's close.
 Earlier, the Canadian currency had fallen to C$1.2675, or
78.89 U.S. cents, its weakest level since January 22.
 Some of Canada's markets were closed on Monday for
provincial holidays, while the Bank of Canada put the
currency's close at C$1.2438 to the U.S. dollar, or 80.40 U.S.
cents on Monday.
 "We've seen another batch of dreadful data from around the
globe in recent days and, generally, markets are reeling again
on concern that the downturn continues to deepen at an
unbelievable pace," said Doug Porter, deputy chief economist at
BMO Capital Markets.
 "We're seeing the U.S. dollar strengthening almost across
the board. This is not just a Canadian dollar story by any
means."
 The greenback, which is currently perceived as a safe-haven
currency, rose broadly while the euro fell to 10-week lows,
pressed by concerns over a recession in eastern Europe and the
knock-on effect on European banks.
 BOND PRICES BOUNCE BACK
 Canadian bond prices were comfortably higher across the
curve with dealers playing catch up as data released on Monday,
when the bond market was closed for a holiday, showed domestic
factory sales had a record plunge in December.
 The data showed manufacturing shipments dropped a record 8
percent from November, the fifth consecutive month-on-month
decrease. It was also far steeper than the 5.3 percent fall
predicted by analysts.
 Eric Lascelles, chief economics and rates strategist at TD
Securities, also said there was more demand for secure
government debt because of concerns that the recession in
emerging Europe may be more severe than elsewhere given large
imbalances.
 Lascelles added that a G7 meeting in Rome over the weekend
that pledged to combat the recession without distorting free
trade did little help risk appetite.
 "Perhaps the fact that the G7 meeting didn't really resolve
much is also a bit of a minor disappointment and then of course
here we are playing catch-up to the absolutely abysmal
manufacturing numbers that came out yesterday," said
Lascelles.
 Canada's economic data calendar will pick up on Wednesday
with the January wholesale trade report, but Friday's consumer
price index data for January is likely to attract the most
attention.
 The interest-rate sensitive two-year bond was up 7 Canadian
cents at C$102.80 to yield 1.154 percent, while the 10-year
bond rallied 70 Canadian cents to C$110.20 to yield 2.865
percent.
 The 30-year bond increased C$1.15 to C$124.30 to yield
3.620 percent.
 (Reporting by Ka Yan Ng, Additional reporting by Frank Pingue,
Editing by Chizu Nomiyama)