CANADA FX-C$ weaker after U.S. debt deal, consumer data

Tue Aug 2, 2011 9:57am EDT
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 * C$ falls to $0.9597 to U.S. dollar, or $1.0420
 * Hits lowest since July 18 after U.S. deal, economic woes
 * U.S. consumer spending falls unexpectedly
 By Andrea Hopkins
 TORONTO, Aug 2 (Reuters) - The Canadian dollar fell to its
weakest level since July 18 on Tuesday morning after U.S. data
showed consumer spending fell in June, adding to a sell-off of
the Canadian currency that came after the U.S. budget deal.
 Two days of weak U.S. data shifted investor focus back to
tepid growth prospects for Canada's largest trading partner and
followed a weekend deal by U.S. lawmakers that will lead to
more than $2 trillion in spending cuts.
 The Canadian currency was at $0.9597 to the U.S. dollar, or
$1.0420, in early trade, down from the C$0.9555 close on
Friday. Canadian markets were closed on Monday for a civic
 The currency hit its weakest point since July 18 earlier in
the session, at C$0.9619, after U.S. data showed consumer
spending fell unexpectedly in June, dimming growth prospects.
 "The market has been busy trying to digest everything going
on the U.S. and the supposed relief over the debt situation
being resolved, pending today's vote, was very short-lived,"
said Steve Butler, director of foreign exchange trading at
Scotia Capital.
 An 11th-hour deal to raise the U.S. debt ceiling cleared
its biggest hurdle in the House of Representatives, staving off
the prospect of a calamitous default but failing to allay fears
that Washington could still lose its coveted triple-A credit
rating. [ID:nN1E76U0F5]
 Butler said grim U.S. manufacturing data on Monday worried
investors as has continued debt uncertainty in Europe. Slowing
global growth will make it hard for Canada's export-oriented
economy to gain traction, making it less likely that the Bank
of Canada will raise rates in 2011.
 A U.S. government report on Tuesday showed consumer
spending dropped in June for the first time in nearly two years
as incomes barely rose, suggesting economic growth could remain
subdued in the third quarter. [ID: nN1E7710A7]
 "A couple of weeks ago the market was talking about a more
hawkish Bank of Canada Governor (Mark) Carney, and now we're
talking about the fact that the prospects for another rate hike
in 2011 in Canada look quite slim, and I think that's taken a
little shine of Canadian dollar," Butler said.
 A Reuters poll conducted last week showed most of Canada's
primary dealers still expected the central bank to raise
interest rates in September or October. [CA/POLL]
 Stock markets were also taking a beating in the wake of the
U.S. budget deal. World stocks hit a one-month low on Tuesday
and Wall Street opened as investors fretted about the
possibility of a U.S. credit downgrade on top of poor economic
growth prospects. [.N]
 A wealth of data is due out this week in both Canada and
the United States, including much-watched employment reports
for both countries on Friday.
 (Editing by Jeffrey Hodgson and Peter Galloway)