CANADA FX DEBT-C$ weakens as Europe woes sink stocks, euro

Mon Oct 17, 2011 4:40pm EDT
 
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 * C$ ends at C$1.0221 vs US$, or 97.84 U.S. cents
 * German finance minister comments send stocks, euro lower
 * Bond prices rise
 By Andrea Hopkins
 TORONTO, Oct 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday as worries about the
euro zone debt crisis dominated and investors returned to safer
investments, driving North American and European stocks lower.
 The decline in stocks, the euro, and commodity-linked
currencies including the Canadian dollar came after an upbeat
week last week, when hopes were raised that next Sunday's
summit of European leaders would resolve the crisis.
 Canada's currency fell more than one U.S. cent, while world
stocks, as measured by the MSCI's all-country world equity
index .MIWD00000PUS, fell 1 percent. On Wall Street, the
major stock indexes slid about 2 percent, while Toronto's main
index was down 1.3 percent. [MKTS/GLOB]
 "It was generally a risk-off move, with the Canadian dollar
steadily deteriorating through the day, coincident with a rally
in bonds and weakness in equities," said Mark Chandler, head of
Canadian fixed income and currency strategy at Royal Bank of
Canada.
 The Canadian dollar CAD=D3 ended the North American
session at C$1.0221 against the U.S. dollar, or 97.84 U.S.
cents, down from Friday's close of C$1.0105 to the U.S. dollar,
or 98.96 U.S. cents. The currency gained 2.7 percent last week
as global markets turned bullish.
 Chandler said the Canadian dollar did get a slight push
from a Bank of Canada business survey that showed business
sentiment remained positive across all indicators, suggesting
there will be no recession, but no spectacular growth, either.
 Spooked by the shaky global economic outlook, Canadian
businesses have downgraded their expectations for sales, hiring
and investment but remain mildly optimistic that modest growth
will continue, the Bank of Canada's autumn business outlook
survey showed. [ID:nN1E79G0Z2]
 Chandler said markets will focus on a speech in Boston on
Tuesday by U.S. Federal Reserve Chairman Ben Bernanke and on
the release of the Fed's Beige Book on Wednesday. Canadian
inflation data is due out Friday.
 With euro-zone woes as a backdrop all week ahead of the
Oct. 23 summit of European leaders, Chandler said the Canadian
dollar will likely be under pressure in the next few sessions.
 "A move to C$1.03 would put us back to early last week, and
that seems easily achievable given the hurdles faced on the
policy side," he said.
 A Group of 20 meeting of finance ministers in Paris this
past weekend had raised expectations that European banks would
be recapitalized and the region's bailout fund expanded to deal
with a potential debt default by Greece.
 But Germany's finance minister, Wolfgang Schaeuble, said on
Monday that even though European governments would adopt a
five-point platform to address the two-year-old debt crisis, a
definitive solution would not be reached at the EU summit. For
details, see [nL5E7LH1GL]
 Canadian bond prices were higher across the curve with the
risk-off mood. The two-year Canadian government bond CA2YT=RR
rose 19 Canadian cents to yield 1.003 percent, while the
10-year bond CA10YT=RR climbed 97 Canadian cents to yield
2.294 percent.
 (Editing by Peter Galloway)