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