CANADA FX DEBT-C$ hits two-week low on global growth fears
* C$ falls to $0.9602 to U.S. dollar, or $1.0414
* Hits lowest since July 18 after U.S. deal, economic woes
* U.S. consumer spending falls unexpectedly
* Bond prices gain in safe-haven bid
By Andrea Hopkins
TORONTO, Aug 2 (Reuters) - The Canadian dollar weakened against the greenback on Tuesday after grim economic data from Washington raised fears of a double-dip recession there, sending investors to traditional safe havens like the Swiss franc, gold and bonds.
Canada's dollar fell to its weakest level since July 18 early in the session after U.S. data showed consumer spending fell in June, adding to a sell-off of the currency that came after the U.S. budget deal.
Two straight days of weak U.S. data suggested Canada's largest trading partner may be stuck in economic malaise, overshadowing relief investors felt after a weekend deal by U.S. lawmakers that averted a U.S. debt default.
"We're generally caught up in angst over global growth. The debt limit issue in the U.S. was seen as a bit of a sideshow but the lingering concerns now is the faltering growth in the U.S., as well as a number of other risk factors," said David Watt, senior currency strategist at RBC Capital Markets.
"We're are looking at the performance of our major trading partner and it's not doing all that great at the present time. People are talking about the probability of another recession."
The Canadian currency ended the session at $0.9602 to the U.S. dollar, or $1.0414, down from Friday's close of C$0.9555, or $1.0466. Canadian markets were closed on Monday for a civic holiday.
The currency reached C$0.9619, its weakest point since July 18, after U.S. data showed consumer spending fell unexpectedly in June, dimming growth prospects.
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.
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]
Watt said unexpectedly weak U.S. data, together with the temporary nature of the U.S. budget fix, has sent investors to gold, bonds and the Swiss franc, which he said has become the de facto safe-haven currency.
The Swiss franc soared to record highs against the dollar and euro, with more gains seen likely as investors fretted about sluggish global growth and debt loads in the United States and Europe. [ID:nN1E7711L1]
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]
Stock markets also took a beating in the wake of the U.S. budget deal, with Toronto's main stock index hitting its worst level in more than eight months. [.TO]
Canadian bond prices rallied, tracking U.S. Treasuries higher on worries over economic growth and the outcome of U.S. deficit wrangling. [US/]
The two-year Canadian government bond CA2YT=RR rose 28.5 Canadian cents to yield 1.253 percent, while the 10-year bond CA10YT=RR jumped C$1.38 to yield 2.627 percent.
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)
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