CANADA FX DEBT-C$ hit by Greek woes, oil price; bonds rise

Fri Jun 24, 2011 4:27pm EDT
 
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   * C$ ends at C$0.9870 to the U.S. dollar, or $1.0132
 * C$ touches lowest level since June 16
 * Bond price rally fueled by safety bid
 (Updates to close)
 By Ka Yan Ng
 TORONTO, June 24 (Reuters) - The Canadian dollar slid to
its lowest point in more than a week against its U.S.
counterpart on Friday, extending losses that started at
mid-week on mounting concerns about euro zone debt woes.
 Government bond prices rallied in a flight to safety ahead
of the weekend.
 Investors worried that Greece's parliament may not pass the
austerity measures needed for the country to secure more
bailout funds to help it out of its sovereign debt crisis.
 In addition, the commodity-linked Canadian currency was hit
for a second day by falling oil prices after the International
Energy Agency's (IEA) decision to release 60 million barrels of
oil from its reserves to boost the economic recovery.
 Not even a brighter outlook for the U.S. economy could slow
the flight to safety. U.S. first-quarter economic growth was
revised modestly higher on Friday and U.S. durable goods orders
in May were also higher.
 "We're clearly concerned about the ongoing issues in Europe
and Greece and the market pessimism -- and the momentum in the
market is so pronounced that even good news, like durable goods
orders today, are completely ignored," said David Tulk, chief
Canada macro strategist at TD Securities.
 "Instead we're waiting for this wave of uncertainty (to
subside) because there is this overriding belief that more can
go wrong than can go right."
 The two-year bond CA2YT=RR jumped 12 Canadian cents to
yield 1.387 percent, while the 10-year bond CA10YT=RR
advanced 29 Canadian cents to yield 2.869 percent.
 The currency CAD=D4 finished at C$0.9870 to the U.S.
dollar, or $1.0132, down from Thursday's North American finish
of $0.9780 to the U.S. dollar, or $1.0225. Earlier, it fell as
low as C$0.9886, or $1.0115, its lowest level since June 16.
For the week, it is down 0.7 percent.
 The currency has been trading with decent volatility but
"still remains sticky to a range" that it has held for a few
weeks now, said Jack Spitz, managing director of foreign
exchange at National Bank Financial. But the 200-day moving
average, now at C$0.9909, is a key level. If broken, it could
spark a deeper round of Canadian dollar weakness.
 "It does suggest that there is a possibility that early
next week or even throughout the week we'll see a breach of
that," said Spitz.   
 "As long as it holds under the 200-day moving average, it
will still be seen as a sideways trade."
 Of key concern to the global outlook is the health of the
global factory sector, said David Watt, senior currency
strategist at RBC Capital Markets, noting that the most recent
string of data was far from encouraging.
 A slew of purchasing manager indexes from around the world,
including Canada, in coming weeks will offer a better read on
how the world's factory sector is performing.
 "Right now the signs are not all that encouraging. If
you're a cyclical commodity-sensitive currency it's not the
best situation and that's pretty much what Canada is," said
Watt.
 (Additional reporting by Solarina Ho; editing by Rob Wilson)