CANADA FX DEBT-C$ pulls back from 13-mth low, still ends weaker

Tue Oct 4, 2011 4:49pm EDT
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 * C$1.0549 vs U.S. dollar, or 94.80 U.S cents
 * Bernanke helps support late-day recovery
 * Greek default fears fuel worry about banking crisis
 * Bond prices lower
 (Updates to close, adds analyst comment)
 By Andrea Hopkins
 TORONTO, Oct 4 (Reuters) - The Canadian dollar hit a fresh
13-month low against its U.S. counterpart on Tuesday but
regained ground to end the day only slightly lower amid fears
of a Greek default and another global recession.
 Global markets were volatile as investor fears about
increasingly likely Greek default were offset by reassuring
words from U.S. Federal Reserve Chairman Ben Bernanke that the
central bank was ready to act further to support the economy.
 The S&P 500 .SPX brushed up against a bear market but
investors rushed in to buy technology and other beaten-down
sectors and Wall Street stocks ended the day sharply higher.
Canadian stocks pared most of their losses. [.N][.TO]
 Still, currency analysts said the bump in risk sentiment is
likely temporary, with little certainty that European leaders
will find a way to manage the growing debt crisis before it
spreads into a banking disaster and world economic slump.
 "Even if we get a little bit of a bounceback because risk
sentiment is ending the day a bit better than it started today,
I don't think that necessarily suggests that we've reversed the
trend over the past two days," said David Watt, senior currency
strategist at Royal Bank of Canada.
 The Canadian dollar CAD=D3 ended the North American
session at C$1.0549 to the U.S. dollar, or 94.80 U.S. cents,
down from Monday's North American session close of C$1.0511 to
the U.S. dollar, or 95.14 U.S. cents.
 The currency had weakened as low as C$1.0658 to the U.S.
dollar, or 93.83 U.S. cents, earlier in the session. That is
the lowest point since Aug. 31, 2010, when it fell as low as
C$1.0674 to the U.S. dollar, or 93.69 U.S. cents.
 Watt said the late-day bump was likely a short-term
retracement as investors took a breath to reassess the value of
commodity-linked currencies against the liquidity and safety of
the U.S. dollar.
 "(Then) we look at the economic and market backdrop and
figure out where to go -- and from that perspective I don't see
much of an improvement in the next couple of weeks," Watt
 Early in the day, John Curran, senior vice president at
CanadianForex, a commercial foreign exchange dealing firm, said
in a research note that the Canadian dollar is testing levels
not seen in more than a year.
 "Several key targets are looming slightly higher at levels,
which, only two weeks ago, would have been considered
ludicrous. Those levels are C$1.0585, C$1.0680, C$1.0755 and
C$1.0855," Curran said.
 "Canadian employment data out on Friday may temporarily
stem the tide of C$ weakness with a strong print but global
growth concerns and European woes still own the spotlight."
 Greece appeared more likely to default on its debt after
euro zone finance ministers postponed a vital aid payment to
Athens until mid-November. For details, see [nL5E7L419D].
 The impact of a Greek default on the global economy, and
particularly on the banking sector, worried markets after the
EU ministers said they were reviewing the size of
private-sector involvement in a second bailout package for
 Bond prices were lower across the curve. The two-year
Canadian government bond CA2YT=RR was down 12.5 Canadian
cents to yield 0.900 percent, while the 10-year bond
CA10YT=RR lost 40 Canadian cents to yield 2.105 percent.
 (Editing by Jeffrey Hodgson)