CANADA FX DEBT-C$ knocked back down on recession worries
* Canadian dollar falls to lowest close in a week
* Nagging concerns about global recession blamed for drop
* Most bond prices follow U.S. debt market to higher close
By Frank Pingue
TORONTO, Nov 18 (Reuters) - The Canadian dollar closed at its lowest level in a week against the U.S. dollar on Tuesday as the growing prospects of a global recession convinced traders to unwind gains recorded in the previous session.
Domestic bond prices, with no Canadian economic data to consider, finished higher alongside a rally in the larger U.S. debt market after a U.S. report eased inflation worries.
The Canadian dollar closed at C$1.2299 to the U.S. dollar, or 81.31 U.S. cents, down from C$1.2232 to the U.S. dollar, or 81.75 U.S. cents, at Monday's close.
While the Canadian currency has managed to attract pockets of buying interest, its general trend over the past two months has been to head lower as concerns about the global economy have intensified.
That, along with sharp slides in prices for key commodities that Canada exports, have shared the blame for the bulk of the currency's 13 percent slide since the end of September.
"It's starting to sound like a broken record these days, just the same steady drumbeat of dismal news," said Sal Guatieri, senior economist at BMO Capital Markets.
The Canadian dollar and most other major currencies fell against the U.S. dollar on Tuesday as investor worries about a deepening global slowdown sapped demand for risk and prompted investors to seek out the relative safety of the greenback.
The slide followed news on Monday that Citigroup Inc, the No. 2 U.S. bank, planned to cut 52,000 jobs by early next year to help it weather global financial turmoil.
Most traders tend to agree that the Canadian dollar will be unable to attract any sustained buying interest until there are clear signs of credit conditions improving and financial flows returning to normal.
Moves in the currency could get some domestic influence as Bank of Canada Governor Mark Carney is scheduled to give a speech to the Canada-United Kingdom Chamber of Commerce early on Wednesday, followed by a press conference.
Also, domestic wholesale trade data for September is due on Thursday while the more key October consumer price index data will be released on Friday.
BONDS MOSTLY HIGHER
Canadian bond prices rallied on the long end of the curve but slipped slightly on the short end as data from the United States showed a record drop in producer prices.
The report added to evidence that inflation pressures are fast disappearing which, along with concerns about a sharp global recession, added to the lure of more secure assets like government debt.
"It's just a bond bull's dream come true," said Guatieri.
The two-year bond fell 7 Canadian cents to C$101.64 to yield 1.925 percent. The 10-year bond rose 22 Canadian cents to C$105.67 to yield 3.543 percent.
The yield spread between the two-year and 10-year bond was 163 basis points, down from 182 at the previous close.
The 30-year bond added 40 Canadian cents to C$114.45 to yield 4.132 percent. In the United States, the 30-year treasury yielded 4.130 percent.
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