CANADA FX DEBT-C$ falls below parity, first time since Feb

Tue Aug 9, 2011 8:20am EDT
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* C$ dips below parity, pares losses

* C$ at C$0.9930 to the U.S. dollar, or $1.0070

* Bond prices retreat after Monday's surge

* U.S. Federal Reserve meeting in focus

By Ka Yan Ng

TORONTO, Aug 9 (Reuters) - Canada's dollar dropped below parity with the U.S. currency for the first time in half a year on Tuesday, but pared losses as hope mounted that the U.S. Federal Reserve would offer some soothing words to shore up investor confidence.

Falling as low as C$1.0010 to the U.S. dollar, or 99.90 U.S. cents, it was the first time the Canadian currency has been weaker than the greenback since Feb. 1.

"A lot of it was risk aversion and commodity prices driven," said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York.

The Canadian dollar was not the only commodity currency under pressure following heavy falls in the overnight session. At one point, the Australian dollar fell below parity against the U.S. dollar, sliding to $0.9927 AUD=D4, its lowest in about five months, but later recovered to $1.0157. The Aussie has lost about 10 cents from a 29-year peak of $1.1081 set just two weeks ago.   Continued...