CANADA FX DEBT-C$ tracks oil, stocks lower, bonds win safety bid

Mon Aug 17, 2009 4:37pm EDT
 
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 * Canadian dollar weakens to 90.32 U.S. cents
 * Bonds extend safe-haven gains
 TORONTO, Aug 17 (Reuters) - The Canadian dollar fell to a
one-month low versus the greenback on Monday tracking a slump
in stocks and oil in a bout of renewed risk aversion.
 Doubts about the pace of global economic recovery prompted
the market to seek safety in the U.S. dollar, and pushed the
Canadian currency to C$1.1126 to the U.S. dollar, or 89.88 U.S.
cents, its lowest since July 20.
 Although the currency managed to cut some of the decline by
the close, the global slide in stock markets and hard-hit
commodity prices, two factors that often influence the movement
of the Canadian dollar, kept up the pressure.
 "I think this is just going into the general concern that
people have priced in too much of a recovery," said John
Curran, senior vice president at CanadianForex, a commercial
foreign exchange dealing firm.
 The Canadian dollar closed at C$1.1072 to the U.S. dollar,
or 90.32 U.S. cents, down from C$1.0998 to the U.S. dollar, or
90.93 U.S. cents, at Friday's close.
 The price of oil slipped to its lowest this month at below
$66 a barrel as investors became more cautious about the pace
of global economic recovery and any subsequent revival in
energy demand. [ID:nSYD485910]
 Risk demand was stung as Chinese stocks extended losses
overnight and other stock markets followed suit, including the
North American markets. Toronto's main stock market opened 3
percent lower and mostly held those losses throughout the
session. [ID:nTOR004875]
 Market direction is likely to come from Chinese markets
again, Curran said.
 "People are looking to China as a growth opportunity, and
Asia, going forward. If that's going to cool off, everything
else is going to cool off as well," he said.
 BONDS BOOSTED BY SAFETY BID
 Canadian bond prices rose sharply across the curve for a
second straight session as stock markets sagged and uneasiness
about the strength of the recovery mounted.
 The rise built on gains made on Friday after a drop in U.S.
consumer confidence data persuaded investors to exit equities
and seek the safety of government bonds.
 The next major data for Canada is the consumer price index
for July on Wednesday. While the numbers are likely to show
Canada posted a second straight month of deflation on an annual
basis in July, core inflation is expected to be stable, close
to the Bank of Canada's 2 percent target rate. [ID:nN17379707]
 The two-year Canadian bond climbed 8 Canadian cents to
C$99.43 to yield 1.285 percent, while the 10-year bond rose 57
Canadian cents to C$102.82 to yield 3.408 percent.
 The 30-year bond rose C$1.05 to C$118.70 to yield 3.892
percent. In the United States, the 30-year bond yielded 4.321
percent.
 Canadian bonds mostly underperformed versus their U.S.
counterparts across the curve, except in the three-year
maturity. The Canadian 30-year bond was 42.9 basis points below
the U.S. 30-year yield, versus 47.3 basis points on Friday.
 (Editing by Frank McGurty)