CANADA FX DEBT-C$ softer on euro zone fears, China tightening

Mon Apr 18, 2011 8:43am EDT
 
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 * C$ weakens to C$0.9646 vs $US, or $1.0367
 * Bond prices firmer across curve
 By Claire Sibonney
 TORONTO, April 18 (Reuters) -  The Canadian dollar softened
slightly against the U.S. dollar as risk appetite dried up over
sovereign debt fears in Europe and worries of a slowdown in the
Chinese economy.
 China's weekend move to raise banks' reserve requirements
-- the seventh such move since October -- signaled Beijing's
determination to stamp out inflation, a stance reiterated by
the country's central bank governor. [ID:nL3E7FG019]
 A Greek newspaper report saying the government wanted to
start debt restructuring talks, even though a Greek government
source denied the report added to the pressure on the market.
[ID:n ATH006025].
 The rise of a euro-sceptic party in Finnish elections was
seen as an extra hurdle to solving the euro zone's debt
problems.
 "The Canadian dollar is going to trade a little bit weaker
today on the back of a Chinese reserve rate hike making markets
shift toward risk aversion, in addition to the renewed concerns
over sovereign debt issues in Europe," said Michael O'Neill,
managing director at Knightsbridge Foreign Exchange.
 Also weighing on Canada's resource-heavy currency, U.S.
crude fell more than $1 a barrel to below $108 after a cut in
output from the world's top exporter Saudi Arabia raised
concern that high prices were hurting demand. [O/R]
 At 8:12 a.m. (1212 GMT), the currency CAD=D4 stood at
C$0.9646 to the U.S. dollar, or $1.0367, down slightly from
Friday's finish at C$0.9601 to the U.S. dollar, or $1.0416.
 O'Neill said he expected the rest of the day's range for
the Canadian dollar to hold between C$0.9610 and C$0.9680.
 On the data front, investors will be watching for foreign
investment in Canadian securities in February, while looking
ahead to March inflation figures on Tuesday.
 Canadian bond prices edged higher across the curve,
tracking U.S. Treasuries and global bond market focused on the
euro zone's debt problems.
 The two-year bond CA2YT=RR was up 3 Canadian cents to
yield 1.732 percent, while the 10-year bond CA10YT=RR gained
23 Canadian cents to yield 3.276 percent.
 (Reporting by Claire Sibonney; Editing by Theodore d'Afflisio)