CANADA FX DEBT-C$ falls to near US$ parity; jobs, Europe weigh

Fri Sep 9, 2011 4:50pm EDT
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 * C$ weakens to C$0.9960 vs US$, or $1.0040
 * Touches weakest level in a month
 * C$ approaches parity as investors flee risk
 * Bond prices rally across curve
 * Canada loses 5,500 net jobs in August
 (Updates to close, adds analyst comment)
 By Andrea Hopkins
 TORONTO, Sept 9 (Reuters) - The Canadian dollar fell to
near parity with the U.S. dollar on Friday, touching a
one-month low, as global doubts about Europe's ability to
resolve its debt crisis punished stock markets and sent
investors to safer havens.
 The Canadian currency fell as part of a selloff of riskier
assets. Bearish headlines on Canadian job woes 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. [MKTS/GLOB]
 The latest shock from the euro zone also sent the euro 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, whose liquidity is favored
in times of stress. [.N] [FRX/]
 "We've got a general risk-off environment which never
helps. Then we got a jobs report which was far from
encouraging. And we've actually had an environment of U.S.
dollar rebound -- which has been conspicuous by its absence in
the past couple of months," said David Watt, senior currency
strategist at Royal Bank of Canada.
 "So that's three things that basically leaned against us
and helped push up close to parity."
 The Canadian currency was already weakening when domestic
economic data came in 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]
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9960 to the U.S. dollar, or $1.0040, 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$0.9980 versus the
U.S. dollar, or $1.0020, its lowest level since Aug. 9, which
marked the last time the Canadian dollar was on one-on-one
footing with the greenback.
 "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, levels last seen in July. The Canadian dollar reached
C$1.3582 to the euro on Friday.
 Stretch noted there was significant support just one basis
point weaker than Friday's low versus the greenback, which if
breached 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.
 RBC's Watt also sees parity or beyond in the near term, as
investors look for safe havens beyond Europe and are lured back
to the relative security of the greenback.
 "We still see parity on the near term horizon, if not
movement above parity," Watt said.
 "We don't think the environment is really all that
conducive to people eagerly going into U.S. dollar, but we
certainly do see more upside to U.S. dollar, as the risk
environment is cycling upward," he said.
 Canadian bond prices ended the day higher across the curve,
rallying along with and slightly outperforming U.S. Treasuries.
 The two-year bond CA2YT=RR was up 19.5 Canadian cents to
yield 0.782 percent, while the 10-year bond CA10YT=RR gained
C$1.01 to yield 2.106 percent.
 (With additional reporting by Claire Sibonney; Editing by
Jeffrey Hodgson)