CANADA FX DEBT-C$ weakens to one-year low; Greek debt woes weigh

Mon Oct 3, 2011 4:42pm EDT
 
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 * C$1.0511 vs U.S. dollar, or 95.14 U.S cents
 * Latest Greece news adds to European debt fears
 * U.S. factory data stronger than expected
 * Bond prices still higher across the curve
 By Andrea Hopkins
 TORONTO, Oct 3 (Reuters) - The Canadian dollar hit its
weakest level against its U.S. counterpart in more than a year
on Monday as growing fears of a Greek default outweighed
positive U.S. economic news.
 World stocks fell to a two-year low and the euro tumbled to
its weakest level against the yen in more than a decade as
worries about Greece unleashed anxiety about the impact on the
global economy. [MKTS/GLOB]
 "News overnight that Greece wasn't going to be able to meet
its obligations certainly put markets in a bit of a negative
mood, and even though you had some stronger economic data in
the ISM, that wasn't enough to alter sentiment," said David
Tulk, chief Canada macro strategist at TD Securities.
 "For time being we remain beholden to European headlines."
 Athens admitted it will miss its deficit target of 7.6
percent this year, making a Greek debt default look more
likely.
 The Canadian dollar CAD=D3 ended the North American
session at C$1.0511 to the U.S. dollar, or 95.14 U.S. cents,
down from Friday's close at C$1.0482 to the U.S. dollar, or
95.40 U.S. cents.
 It fell as low as C$1.0534, its weakest level since Sept.
3, 2010.
 Tulk said the absence of important Canadian economic data
until the closely watched employment report on Friday suggests
the Canadian currency will follow global market sentiment in
the next couple of days, trading in a relatively tight range
between C$1.0450 and C$1.0550.
 Canadian and U.S. stock indexes fell more than 2 percent as
financial shares weighed, eclipsing an early boost from
better-than-expected U.S. manufacturing data. For details, see
[nN1E7920NX] [.TO] [.N]
 Bank shares were battered in Europe as investors feared the
impact of a Greek default on holders of the country's bonds,
such as Franco Belgian financial group Dexia DEXI.BR, whose
stock slumped more than 10 percent.
 U.S. factory activity expanded at a faster pace than
expected in September as production and hiring increased, a
report by the Institute for Supply Management (ISM) showed,
suggesting Canada's largest trading partner may escape sinking
back into recession. [ID:nN1E7920NX]
 "It suggests that sentiment may be weaker than the actual
economic data," Benjamin Reitzes, economist at BMO Capital
Markets.
 A separate report out on Monday showed Canadian
manufacturing activity picked up pace for a third straight
month in September, adding to hope the economy will avert
another recession. [ID:nT5E7K902M]
 Bond prices were higher across the curve. The two-year
Canadian government bond CA2YT=RR was up 8 Canadian cents to
yield 0.845 percent, while the 10-year bond CA10YT=RR gained
75 Canadian cents to yield 2.072 percent.
 (Editing by Jeffrey Hodgson)