CANADA FX DEBT-C$ stung by return to risk aversion, bonds up

Wed Aug 19, 2009 8:10am EDT
 
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   * Canadian dlr falls half a cent on risk aversion
 * Bonds rise on sagging equities
 * Canadian inflation softens in July
 TORONTO, Aug 19 (Reuters) - Canada's dollar was little
changed versus the U.S. currency on Wednesday after Canadian
inflation data, but held lower from the previous session, as
investors bailed out of riskier currencies as doubt resurfaced
about the global recovery.
 Currencies have lately been keying off stock market moves
and as Chinese shares extended losses. European shares were
also knocked lower, inspiring a flight to the relative safety
of the greenback and yen. [ID:nLJ548765]
 U.S. stock index futures slid about 1 percent.
 Canada's annual inflation rate hit a 56-year-low in July,
when prices fell by 0.9 percent from a year earlier on sharply
lower energy prices, Statistics Canada said. [ID:nN19458137]
 The core annual inflation rate -- closely watched by the
Bank of Canada -- dropped to 1.8 percent from 1.9 percent in
June.
 The report did not influence the Canadian currency, nor
domestic bonds, because it was fairly in line with forecasts
and it did not change expectations of Bank of Canada policy
action.
 "It won't mean a whole lot. The miss isn't too outside
market expectations. But on the surface it's probably a bit
bearish for the Canadian dollar in that it reinforces the
message that the Bank of Canada won't be tightening policy for
a long time," said Sal Guatieri, senior economist BMO Capital
Markets.
 At 7:40 a.m. (1140 GMT), the Canadian dollar CAD= was at
C$1.1079 to the U.S. dollar, or 90.26 U.S. cents, down from
C$1.1018 to the U.S. dollar, or 90.76 U.S. cents, at Tuesday's
close.
 Canadian bonds CABONDT made healthy gains on the back of
sliding equities. The two-year Canadian bond was up 6 Canadian
cents at C$99.48 to yield 1.260 percent, while the 10-year bond
rose 30 Canadian cents to C$103 to yield 3.386 percent.
 The 30-year bond jumped 45 Canadian cents to C$118.95 to
yield 3.879.
(Reporting by Ka Yan Ng and Scott Anderson; editing by
Jeffrey Benkoe)