CANADA FX DEBT-C$ slips as S&P downgrade adds to safety push
* C$ weakens to C$0.9662 to the U.S. dollar, or $1.0350
* Bond prices firmer across curve (Adds details and comments)
By Claire Sibonney
TORONTO, April 18 (Reuters) - The Canadian dollar softened against the greenback on Monday morning in a flight to safety as a squall of uncertainty, including Standard & Poor's long-term downgrade of the United States, hit the market.
Standard & Poor's maintained the country's top AAA rating, but downgraded the U.S. credit outlook, saying authorities have not made clear how they will tackle long-term fiscal pressures. [ID:nN18195555]
"That's attracting risk-off activity into the marketplace. Ironically, but unsurprisingly, a bit to the U.S. dollar itself," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"The market is still comfortable in buying the U.S. dollar, but not as a result of stronger U.S. fundamentals. It's an entirely risk-off, safe-haven environment. That's what's causing the euro and the yen to catch a bit, and that's happening across the board as equities melt away and commodities are being sold off, with the exception of gold."
The Canadian currency was also buffeted by lower oil prices and worries over euro debt and the possibility of a slowdown in the Chinese economy.
At 10:21 a.m. (1212 GMT), the Canadian dollar CAD=D4 was at C$0.9662 to the U.S. dollar, or $1.0350, down from Friday's finish at C$0.9601 to the U.S. dollar, or $1.0416.
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-skeptic 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]
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 looking ahead to March inflation figures on Tuesday.
Canadian bond prices edged higher across the curve, with the two-year bond CA2YT=RR was up 7 Canadian cents to yield 1.707 percent, while the 10-year bond CA10YT=RR gained 42 Canadian cents to yield 3.252 percent. (Additional reporting by Solarina Ho; Editing by Theodore d'Afflisio and Peter Galloway)
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