CANADA FX DEBT-C$ ends 2 cents lower as Europe fears dominate

Tue Nov 1, 2011 4:34pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

   * C$ ends at C$1.0188 vs US$ or 98.15 US cents
 * Risk-off trade follows Greek referendum move
 * Eye on Fed, Bernanke on Wednesday
 * Bond prices rally across the curve
 By Andrea Hopkins
 TORONTO, Nov 1 (Reuters) -  The Canadian dollar tumbled
more than two cents against the U.S. dollar on Tuesday to end
below parity as fears over the euro-zone debt crisis and the
collapse of broker-dealer MF Global darkened the outlook for
the global economy.
 Global stocks and the euro took a beating after the Greek
government's surprise call for a referendum on the latest euro
zone bailout deal rekindled fears the country could face an
imminent default. [MKTS/GLOB]
 "That certainly put a lot more caution into the market and
so we've seen a pretty dramatic flight into safe-haven assets.
You see the U.S. 10 years (Treasuries) below 2 percent and a
weaker Canadian dollar as a consequence," said David Tulk,
chief Canada macro strategist at TD Securities.
 The Greek government also faces a parliamentary confidence
vote on Friday.
 The Canadian dollar CAD=D3  ended the North American
session at C$1.0188 versus the greenback, or 98.15 U.S. cents,
down from Monday's North American session finish of C$0.9967 to
the U.S. dollar, or $1.0033.
 Early in the session it sank to C$1.0208, or 97.96 U.S.
cents, more than two cents lower than Monday's close and its
weakest level in a week.
 Investor appetite for risk was also undermined by data
showing an unexpected slowdown in Chinese and U.S.
manufacturing, as well as Monday's news of the bankruptcy of
U.S. futures broker MF Global Holdings MF.N.
 "All the things that could go wrong for CAD are going wrong
at the same time here," said Camilla Sutton, chief currency
strategist at Scotia Capital.
 Tulk said it was anyone's guess where the currency will go
in the short term as fundamentals related to the Canadian
dollar and the parity benchmark took a backseat to global
headlines that drive investors to and from risky assets.
 "Some of the traditional psychology around parity is no
longer as applicable. It seems we're quite happy to trade
through that based on developments," Tulk said.
 "Now that we're looking at this confidence vote in Greece
followed by a potential referendum, I think we're stuck with
more volatility basically through to the end of the year."
 The days immediately ahead are also full of risk, with
market attention on what the U.S. Federal Reserve will say on
Wednesday.
 The Fed could begin to prepare financial markets for
further monetary easing at the conclusion of a two-day meeting
that began on Tuesday, even if it refrains from any new
stimulus just yet. Fed Chairman Ben Bernanke will hold a news
conference following the conclusion of the meeting.
[FED/AHEAD]
 "The Federal Reserve is in a position now where they are
watching a very slow anemic recovery and trying to provide the
right sort of background for growth," Tulk said.
 Canadian government bond prices rallied across the curve,
following U.S. Treasuries higher as investors scurried for
safer investments. [US/]
 The two-year bond CA2YT=RR rose 15 Canadian cents to
yield 0.922 percent, while the 10-year bond CA10YT=RR climbed
C$1.25 Canadian cents to yield 2.146 percent.
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)