4 Min Read
*C$ hits low C$0.9974 vs US$, or $1.0026
*Bond prices rally across curve
*European Cental Bank member Stark to step down
*Canada loses 5,500 net jobs in August
*Obama lays out $447 billion jobs plan (Updates to midday)
By Claire Sibonney
TORONTO, Sept 9 (Reuters) - The Canadian dollar fell to near parity with the U.S. dollar on Friday, touching a one-month low, but it rallied against the euro after the surprise resignation of a European Central Bank board member.
The Canadian currency fell as part of a selloff of risk assets following bearish headlines on Canadian and U.S. job woes that were amplified by news that a top German ECB official would quit due to disagreement with the bank's policy of buying euro zone government bonds. [ID:nL5E7K91CF]
The latest shock from the euro zone sent the euro, global stocks and oil prices tumbling, weighing on Canada's risk- and commodity-related currency. Meanwhile, safe-haven flows poured into the U.S. dollar and Treasuries. [.N] [FRX/]
"At the moment, liquidity of the U.S. is king ... the uncertainties on the risk side are seeing the (Canadian dollar) lag, but it doesn't have anything like the structural negatives that are facing the euro zone, hence the bias is that euro/CAD will continue to go lower," said Jeremy Stretch, head of currency strategy at CIBC in London.
He said that over the next few sessions the Canadian dollar could climb as high as C$1.34 versus the euro, or 74.63 euro cents, to levels last seen in July.
"Of course, let's not completely blindside the labor market data, but it's more of a (U.S.) dollar-based story and it's the negativity on the broader international perspective."
The Canadian dollar was already succumbing to the U.S. dollar after Canadian economic data fell below expectations, including a surprise loss of 5,500 net jobs in August. It was also hit by fears that U.S. President Barack Obama's plan to stimulate jobs will be held up in Congress. [ID:nN1E7880PE] [ID:nN1E7880DX]
At 11:33 a.m. (1533 GMT), the Canadian dollar CAD=D4 stood at C$0.9962 to the U.S. dollar, or $1.0038, down from Thursday's North American session close at C$0.9880 to the U.S. dollar, or $1.0121.
Earlier, the currency fell as low as C$0.9974 versus the U.S. dollar, or $1.0026, its lowest level since Aug. 9, which marked the last time the Canadian dollar was on one-on-one footing with the greenback.
Stretch noted significant support just one basis point weaker than Friday's low, which could drive the Canadian dollar to the other side of parity at C$1.0010-20.
He expected that such a move would be short-lived, however, saying that the currency's underlying dynamics are still relatively encouraging.
Canadian bond prices cut earlier losses to rally alongside U.S. Treasuries. [US/].
The two-year bond CA2YT=RR was up 12 Canadian cents to yield 0.819 percent, while the 10-year bond CA10YT=RR gained 56 Canadian cents to yield 2.155 percent. (Editing by Peter Galloway)