CANADA FX DEBT-C$ weakens to July low vs US$ on euro zone fears

Mon Jul 11, 2011 11:20am EDT
 
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   * C$ weakens to C$0.9681, or $1.0329
 * Hits lowest level against US$ since June 30
 * Touches strongest level against euro since March 14
 * Equities, oil markets also trading lower
 * Bond prices higher across the curve
 By Trish Nixon and Solarina Ho
 TORONTO, July 11 (Reuters) - The Canadian dollar weakened
to the lowest level this month against the U.S. currency on
Monday, as investors moved away from riskier assets on fears of
contagion in Europe and a slowing global economy.
 World stocks hit one-week lows and the euro slid across the
board as intensifying concerns that Italy could be the next
victim of the euro zone debt crisis prompted an emergency
meeting of top European officials. [MKTS/GLOB]
 "There seems to be some contagion with Italy. The Spain
spreads are blowing out this morning as well. In that scenario,
it's going to be difficult for equities to trade well,
difficult for the Canadian dollar to trade well," said Darcy
Browne, managing director at CIBC's capital markets trading
unit.
 "Equities markets are down, oil's down, and the Canadian
dollar is under a little bit of pressure here."
 A weaker-than-expected U.S. jobs report on Friday and data
showing China's import growth fell to its slowest pace in 20
months also contributed to risk-off sentiment.
 Oil, a key Canadian export, and often influential in the
currency's movements, fell by more than a dollar on euro
worries, while a drop in Chinese crude imports also rekindled
concerns about a slowdown in demand. [O/R]
 At 10:20 a.m. (1400 GMT), the currency CAD=D4 stood at
C$0.9681 to the U.S. dollar, or $1.0329, down from Friday's
North American finish of C$0.9607 to the U.S. dollar, or
$1.0409.
 Browne noted the currency was running up against some
strong technical levels, hitting a session low around the
55-day moving average of C$0.9696, or $1.0314.
 Should the Canadian dollar begin to rebound, Browne
predicted U.S. dollar support around C$0.9620, followed by
C$0.9550.
 "It just seems that anytime we get down to that 95 cent
level, the currency starts looking rich, based on what the real
risks in the world are," he said.
 Canada's dollar did strengthen against the beaten-down
euro. It touched its highest point since March 14, with one
Canadian dollar buying 73.83 euro cents.
 Canadian bond prices were higher across the curve, as
investors shed their riskier assets in favor of safe-haven
government bonds.
The two-year bond CA2YT=RR was up 13.5 Canadian cents to
yield 1.444 percent, while the ten-year bond CA10YT=RR rose
43 Canadian cents to yield 2.916 percent.
Short term Canadian bonds outperformed their U.S.
counterparts, while long-term bonds underperformed.
 (Editing by Jeffrey Hodgson)