CANADA FX DEBT-C$ weakens to 2011 low, eye on Europe
* C$1.0494 vs US dollar, or 95.29 U.S cents
* Bond prices higher across the curve
By Andrea Hopkins
TORONTO, Oct 3 (Reuters) - The Canadian dollar weakened to a 2011 low against the U.S dollar on Monday as fresh worries about the European debt crisis contributed to skittish markets.
World stocks kicked off the last quarter of 2011 lower while the yen and core government bonds rose as concerns grew over the impact a Greek default would have on Europe's banks after Athens admitted it will miss deficit targets. [MKTS/GLOB]
U.S. stock index futures were modestly lower as concerns over Greece's teetering finances returned to the forefront and after equities ended their worst quarter since 2008. [.N]
"As with most of the majors, we're taking our cue from general risk appetite, so the dollar-CAD popped up through C$1.05 earlier in the day when risk appetite was at its worst, and it subsequently pulled back as we've had a little bit of a bounce in risk appetite," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.
"There really isn't much domestically Canadian going on and we're just trading where the S&P futures dictate."
At 8:51 a.m. (1251 GMT), the Canadian dollar CAD=D3 stood at C$1.0494 to the U.S. dollar, or 95.29 U.S. cents, little changed from Friday's close at C$1.0482 to the U.S. dollar, or 95.40 U.S. cents.
It earlier hit C$1.0524, its weakest level since September, 2010.
Cole said the currency should trade in a range between C$1.04-C$1.0525, representing Friday's high and the overnight low, respectively, "unless we see a really big sell off in equity markets."
He said the focus remained on Europe, with little news on the economic front in Canada until employment data is released on Friday. ECONCA
Draft budget figures showed Greece would miss its deficit targets for both this year and next, which could force the country to seek more bailout funds. If it fails to get the financing, the government may be forced to default, an outcome that could accelerate a slide back into global recession. For details, see [ID:nL5E7L20IT]
A sharp fall in shares of Franco-Belgian financial group Dexia (DEXI.BR: Quote), highly exposed to Greek loans, highlighted concerns about the extent to which a default in Athens would damage already fragile European banks. [ID:nL5E7L30GX]
Canadian banks have said they have little to no exposure to Greek debt.
Policymakers looked no nearer to agreeing on a definitive solution to the euro zone debt crisis. Officials meeting on Monday are discussing ways to leverage the bloc's rescue fund and pressure Greece to implement agreed structural reforms. [ID:nL5E7L20LD]
Bond prices were higher across the curve. The two-year Canadian government bond CA2YT=RR was up 0.5 Canadian cent to yield 0.882 percent, while the 10-year bond CA10YT=RR gained 25 Canadian cents to yield 2.127 percent. (Editing by Jeffrey Hodgson)
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