CANADA FX DEBT-C$ slightly stronger as investors watch Europe

Thu Oct 20, 2011 9:17am EDT
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 * C$ at C$1.0180 vs US$, or 98.23 U.S. cents
 * European uncertainty rocks markets
 * Bonds mixed
 By Andrea Hopkins
 TORONTO, Oct 20 (Reuters) - The Canadian dollar was
slightly stronger against its U.S. counterpart in early trade
on Thursday as the push-pull of the euro zone efforts to come
up with a plan to address the region's debt crisis continued.
 The euro was up sharply and Wall Street looked set for a
slightly higher opening, suggesting some risk-on sentiment, but
world stocks as measured by MSCI .MIWD00000PUS were down
around two-thirds of a percent and European shares dipped.
 "Markets have pulled back a bit waiting to see what's going
to happen in Europe. I think it's going to be a sit-tight
backdrop for cyclicals and the Canadian dollar," said David
Watt, senior currency strategist at Royal Bank of Canada.
 At 9:09 a.m. (1309 GMT), the Canadian dollar CAD=D3 stood
at C$1.0180 to the U.S. dollar, or 98.23 U.S. cents, up
slightly from Wednesday's North American session close at
C$1.0202 to the U.S. dollar, or 98.02 U.S. cents.
 Watt said the Canadian currency could face choppy trade as
investors tried to decipher developments in Europe, but should
trade in a relatively tight range between C$1.0125 and
 "Everything seems to hinge on Europe nowadays, it's a
ridiculous development, but every idle prattle of any minor EU
official seems to have market moving impact. It's nuts -- there
is no clarity and no information," Watt said.
 Doubts about the euro zone's ability to come up with a
comprehensive plan to address the region's debt crisis shook
financial markets, although confirmation that a bailout fund
could buy bonds took the edge off the worst fears. [MKTS/GLOB]
 Optimism had been growing that the weekend meeting of
European Union leaders in Brussels would come up with a
substantial plan for dealing with the debt crisis, primarily
through ramping up the bloc's bailout mechanism, the EFSF.
 But French President Nicolas Sarkozy said on Wednesday that
plans to tackle the crisis had stalled with Paris and Berlin at
odds over how to increase the bailout fund. [ID:nL5E7LJ3YJ]
 In economic news, Canadian wholesale trade grew by a
less-than-expected 0.2 percent in August from July, pushed
higher by the machinery, equipment and supplies sector,
Statistics Canada data indicated on Thursday. Analysts had
expected an increase of 0.5 percent. [ID:nN1E79J0B3]
 U.S. data showed new claims for unemployment benefits fell
last week to 403,000, just above economist forecast for a drop
to 400,000 claims. [ID:nN1E79J0BQ]
 Canadian bond prices were mixed in early trade. The
two-year Canadian government bond CA2YT=RR was down 3.5
Canadian cents to yield 1.054 percent, while the 10-year bond
CA10YT=RR was flat, yielding 2.338 percent.
 (Editing by Jeffrey Hodgson)