CANADA FX DEBT-C$ weakens on U.S. debt fears, eye on U.S. vote

Thu Jul 28, 2011 4:26pm EDT
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* C$ falls to C$0.9516 vs US$, or $1.0509

* U.S. uncertainty keeps money on sidelines, vote looms

* Bond prices mostly firmer

By Andrea Hopkins

TORONTO, July 28 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Thursday, trading in a tight range as investors awaited a crucial vote in the United States on a bill to cut the deficit.

The Canadian currency had strengthened earlier in the day but sold off slightly as a vote loomed in the United States on Thursday, where lawmakers are working to compromise on a deficit reduction plan that would head off a U.S. default.

"It's been in a very tight range in the last couple of days, and we're just kind of waiting for some outcome in the U.S., some announcement on the U.S. debt crisis," said David Bradley, director of foreign exchange trading at Scotia Capital.

He said the Canadian dollar remained a preferred currency for central banks looking to diversify out of the U.S. dollar and euro currencies, given the debt crises facing each region. Like other commodity-linked currencies, the Canadian dollar has benefited from a flight-to-safety flow in recent months.

Moody's debt rating agency reaffirmed its Aaa rating on Canada's sovereign debt in its annual report on Canada on Thursday, citing the nation's economic resiliency, very high government financial strength and a low susceptibility to event risk.   Continued...