CANADA FX DEBT-Canada dollar slides in Goldman fallout

Mon Apr 19, 2010 8:46am EDT
 
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 * C$ falls to C$1.0185 or 98.18 U.S. cents
 * Bonds little changed ahead of BoC
 By Claire Sibonney
 TORONTO, April 19 (Reuters) - The Canadian dollar extended
losses against its U.S. counterpart on Monday to its lowest in
almost 3 weeks as lingering concerns over fraud charges against
Goldman Sachs, and wider fallout in the financial sector,
curbed investor appetite for risker assets.
  Financial markets were rattled after the U.S. Securities
and Exchange Commission charged Goldman Sachs Group with fraud
on Friday in connection with a debt product tied to subprime
mortgages.
 The currency fell as low as C$1.0216 to the U.S. dollar, or
97.89 U.S. cents, its lowest level since March 30, as investors
scampered to traditional safe-haven assets.
 "When markets are generally reducing risk that tends to be
negative for Canada," said Adam Cole, global head of FX
strategy at RBC Capital Markets in London.
 "If we do see stocks sustaining the losses that they've
seen on the back of this story then that does raise fears going
forward of more anti-financial legislation, which is at the
route of the problems."
 At 8:36 a.m. (1236 GMT), the Canadian dollar CAD=D4 was
at C$1.0185, or 98.18 U.S. cents, down from Friday's finish at
C$1.0132 to the U.S. dollar, or 98.70 U.S. cents.
 Oil hit a 3-week low below $82 a barrel and gold fell more
than 1 percent to its lowest in nearly two weeks, which added
pressure to the commodity-linked currency. [O/R] [GOL/]
 Before the Goldman news broke, market watchers had expected
the Canadian dollar to drift higher ahead of the Bank of
Canada's policy announcement on Tuesday. The market is looking
for clues from the bank on the timing of an increase in its key
interest rate from the current low 0.25 percent level.
 Most of Canada's primary securities dealers predicted in a
Reuters poll on Thursday that the bank would wait until July to
raise interest rates as the high-flying Canadian dollar gives
it some breathing room by providing a tightening mechanism for
the economy. [ID:nN15207373]
 The central bank has pledged to keep rates at the current
low level until the end of June, so long as inflation remains
in check. Higher interest rates normally draw investment and
push up a currency.
 However, Cole said momentum for the Canadian currency to
move higher based on any signals from the central bank to move
sooner rather than later on interest rates could be
overshadowed by the Goldman fallout.
 "When you get moves in risk appetite of this magnitude,
they tend to overwhelm domestic news," he said.
 "Domestically, we still think Canada looks very very
good."
 Canadian bond prices were little changed ahead of the Bank
of Canada announcement.
  The two-year government bond CA2YT=RR was flat at
C$99.32 to yield 1.869 percent, while the 10-year bond
CA10YT=RR edged 5 Canadian cents higher to C$100.550 to yield
3.678 percent.
  (Reporting by Claire Sibonney; Editing by Theodore
d'Afflisio)