CANADA FX DEBT-C$ ends weaker as gloomy Fed, Europe weigh
* C$ ends at C$1.0202 vs US$, or 98.02 U.S. cents
* Beige Book dampens risk appetite
* Equities, euro lower amid debt crisis worries
* Bonds pare losses
By Andrea Hopkins
TORONTO, Oct 19 (Reuters) - The Canadian dollar ended weaker against its U.S. counterpart on Wednesday as a dimmer economic outlook from the U.S. Federal Reserve and worries about Europe's debt crisis drove investors away from risk.
World stocks declined and the euro pared gains after optimism faded that European leaders will make substantial progress on the euro zone debt crisis this weekend. [MKTS/GLOB]
A report from the Federal Reserve that the U.S. economic outlook dimmed in September and cautionary comments from a key Fed official also sapped sentiment, sending riskier assets including the Canadian dollar lower.
"The Beige Book wasn't exactly optimistic and Rosengren's comments were also somewhat pessimistic, and that combined with ongoing volatility as a result of headline risk, predominantly out of the euro zone, are all causing equities to pull back and high beta currencies to be falling back in tandem," said Jack Spitz, managing director of foreign exchange at National Bank.
The Canadian dollar CAD=D3 ended the North American session at C$1.0202 to the U.S. dollar, or 98.02 U.S. cents, near the session low and below Tuesday's North American session close at C$1.0144 to the U.S. dollar, or 98.58 U.S. cents.
The currency had rallied early in the day on optimism that European policymakers would make progress at a weekend summit to address the region's debt crisis, but gloomy news from the U.S. Fed sent investors into a risk-averse mood.
In its regular Beige Book economic summary, the Fed said the U.S. outlook weakened, leading businesses to be wary of spending and of building up inventories ahead of the holiday sales season. [ID:nN1E79I1EX]
At the same time, Boston Fed President Eric Rosengren said the central bank may need to do more to boost the U.S. economy should it weaken further or if it is hit by a new shock. [ID:nN1E79I1II]
U.S. stocks fell after the Beige Book was released, while Treasury debt prices rose on its glum economic outlook.
Weaker-than-expected Canadian data also dragged on the Canadian dollar.
Canada's composite leading indicator dropped by 0.1 percent in September from August, the first fall in a year, on lower stock markets and weakness in the manufacturing sector, bucking market expectations for a 0.1 percent gain. [ID:nN1E79I0AM]
Canadian bond prices pared losses but ended the day lower. The two-year Canadian government bond CA2YT=RR was down 3.5 Canadian cents to yield 1.033 percent, while the 10-year bond CA10YT=RR was down 17 Canadian cents to yield 2.332 percent.
Canada's sale of two-year government bonds met with softer but still healthy demand as ample supply kept buyers in check and progress on the European debt crisis boosted risk appetite earlier in the session. [ID:nN1E79I1IS]
In other news, the Bank of Canada said it will increase its minimum purchases at government bond auctions to 20 percent of debt being sold from the current 15 percent to accommodate a projected increase in liabilities. [ID:nN1E79I1UO] (Editing by Jeffrey Hodgson)
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