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

Mon Jul 11, 2011 5:10pm EDT
 
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   * C$ weakens to C$0.9690, or $1.0320
 * Hits lowest level against US$ 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
 TORONTO, July 11 (Reuters) - Canada's dollar weakened
against the greenback on Monday, touching its lowest point this
month, as fresh euro zone debt problems hurt investor demand
for commodity-linked currencies.
 Global stocks dropped and the euro sank as worries that
Italy could become the latest country caught up in the
euro-zone debt crisis caused investors to snap up safe-haven
U.S. Treasury debt. [MKTS/GLOB]
 "The story is still really for dollar/Canada one of risk
aversion or risk appetite," said Shaun Osborne, chief currency
strategist at TD Securities, predicting the success of Europe's
response to the latest problem would set the near-term
direction for the Canadian dollar.
 Oil, a key Canadian export 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]
 The Thomson Reuters-Jefferies CRB index .CRB, a global
commodities benchmark, was down 0.86 percent.
 The currency CAD=D4 ended the North American session at
C$0.9690 to the U.S. dollar, or $1.0320, down from Friday's
finish of C$0.9607 to the U.S. dollar, or $1.0409. Earlier in
the session it fell to C$0.9696, its weakest level since June
30.
 The news from Europe overshadowed reports showing strong
Canadian housing starts and a marked improvement in the
domestic business outlook. [ID:nN1E76A0YX]
 TD's Osborne anticipated Canadian dollar support at the
C$0.9710 area. Should the currency rebound he expected
resistance around the C$0.9550 and C$0.9560 levels.
 Osborne noted the Canadian dollar held up well against most
other major currencies, especially the beaten-down euro. It
touched its highest point since March 14 against the euro, 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 17 Canadian cents to
yield 1.426 percent, while the ten-year bond CA10YT=RR rose
55 Canadian cents to yield 2.902 percent.
Short term Canadian bonds outperformed their U.S.
counterparts, while long-term bonds underperformed.
 (Editing by Jeffrey Hodgson)