CANADA FX DEBT-C$ knocked down as risk appetite evaporates

Wed Nov 18, 2009 4:54pm EST
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 * C$ closes at C$1.0545 per U.S. dollar
 * Canada CPI up after 4-month decline
 * Bonds flat as new supply hits market
 (Recasts to close)
 By Frank Pingue
 TORONTO, Nov 18 (Reuters) - Canada's currency fell for the
second straight session on Wednesday after rising earlier in
the session to nearly its strongest in about a month, reversing
course when it failed to crack a key technical level.
 The Canadian dollar rallied as high as C$1.0450 to the U.S.
dollar, or 95.69 U.S. cents, early in the session, but experts
said its failure to pierce the technical level opened the door
to a wave of selling.
 "Overnight and into early morning trading the market was
testing C$1.0450 but it couldn't break below that and as a
result we saw buying interest return and push up (the U.S.
dollar)," said Matthew Strauss, senior currency strategist at
RBC Capital Markets.
 Strauss also said a general lack of risk appetite in the
listless session weighed on the currency as North American
equities finished the session largely unchanged.
 The Canadian dollar closed at C$1.0545 to the U.S. dollar,
or 94.83 U.S. cents, down from C$1.0511 to the U.S. dollar, or
95.14 U.S. cents, at Tuesday's close.
 Canada's currency had move little after data that showed
consumer prices in Canada rose in October since the report is
not expected to sway the Bank of Canada from holding its key
interest rate at a record low until mid-2010. [ID:nN1892543]
 Helping to cushion the currency's fall were expectations
that U.S. interest rates will remain low for some time. Such a
scenario tends to encourage global investors to look for better
returns from riskier trades such as high-yielding currencies.
 The next batch of Canadian data due on Thursday includes a
look at wholesale trade figures for September and the leading
indicator for October.
 Canadian bond prices finished flat to lower across the
curve given supply concerns, while a skid in the bigger U.S.
Treasury markets also weighed on domestic bond prices.
 The Bank of Canada's C$3 billion auction of 2.5 percent
government bonds yielded an average 2.732 percent, which some
experts said did not garner much attention given a rash of
other supply. [ID:nTOR006939]
 "There were so many deals coming down the pipeline that
they took priority," said Sheldon Dong, fixed income analyst TD
Waterhouse Private Investment. "Overall, performance today was
just weighed primarily by supply."
 Among the new issues Dong mention were offerings by Canada
Mortgage Housing Trust, the Province of Nova Scotia and YPG
Holdings. [CAN-TNC]
 The two-year Canada bond dropped 1 Canadian cent to C$99.88
to yield 1.313 percent, while the 30-year bond fell 68 Canadian
cents to C$117.60 to yield 3.945 percent.
 Canadian bonds outperformed U.S. Treasuries across much of
the curve. The Canadian 10-year yield was 4.50 basis points
above its U.S. counterpart, compared with 4.90 basis points on
 (Editing by Frank McGurty)