CANADA FX-DEBT-C$ sinks as equities drop, investors seek safety
* C$ ends at C$0.9795 vs US$, or $1.0209
* Reaches weakest level since June 29
* Biggest intraday drop since Japan nuclear crisis
* Equity markets retreat on economic woes
* Bonds prices rise in flight to safety
By Andrea Hopkins
TORONTO, Aug 4 (Reuters) - The Canadian dollar tumbled nearly 2 U.S. cents to hit a five-week low against the greenback on Thursday, hurt by a broad stock market sell-off and worries about the U.S. and global economic recovery.
Efforts by Japan and Switzerland in recent days to stem their currencies' rise against the U.S. dollar helped the greenback, sending commodity-linked currencies like the Canadian and Australian dollars sharply lower. [FRX/]
Global stock markets also plunged, with U.S. indexes dropping more than 4 percent and Toronto's main index down more than 3 percent as worried investors took to the sidelines awaiting better economic news. [MKTS/GLOB]
"You're basically just in a fundamental risk-off frame of mind right now. It's the events in Europe, it's the equity markets catching up to the realization that earnings alone can't get you over this hump, and that you really are in a world where a lot more can go wrong than can go right," said David Tulk, chief Canada macro strategist at TD Securities.
"We're just seeing all the flight to quality right now into the U.S. dollar at the expense of the Canadian dollar."
The Canadian dollar ended the session at C$0.9795 versus the U.S. dollar, or $1.0209, down sharply from Wednesday's North American session close at $0.9626 to the U.S. dollar, or $1.0389.
The currency at one point fell as low as C$0.9813, its weakest since June 29 and worst intraday performance since March 15, when it tumbled more than 2-1/2 U.S. cents on fears of nuclear catastrophe in Japan.
Tulk pointed to near-term Canadian dollar support at around C$0.98, levels last seen at the end of June, but warned the run by investors to safe havens may mean previous assumptions about trading ranges will falter.
"At this point, you're starting to get a little more concern, just given that we're seeing this momentum take over. A lot of those technical support levels may have a smaller role to play," Tulk said.
Canadian government bond prices were higher on the broad flight to safety mood and U.S. two-year Treasury note yields dipped to a record low as recession fears drove investors to the safety of U.S. government debt. [US/]
Canada's two-year bond CA2YT=RR was up 47.5 Canadian cents to yield 1.013 percent, while the 10-year bond CA10YT=RR added C$1.30 to yield 2.521 percent, near a multi-year low. (Editing by Jeffrey Hodgson)
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