CANADA FX DEBT-C$ weakens as Europe worries offset strong data

Tue Nov 15, 2011 9:35am EST
 
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 * C$ at C$1.0224 vs US$, or 97.81 U.S. cents
 * Strong Canadian manufacturing data boosts C$ briefly
 * C$ also gets lift from U.S. October retail sales data
 * Bond prices higher across the curve
 By Jennifer Kwan
 TORONTO, Nov 15 (Reuters) - The Canadian dollar sank
against the greenback on Tuesday as rising euro zone bond
yields highlighted the troubles facing policymakers in
resolving the region's debt crisis.
 But the currency's fall was cushioned by strong domestic
data that showed manufacturing sales rose twice as fast as
expected in September to the highest level since October 2008,
sealing expectations for robust third-quarter economic growth.
[ID:nN1E7AE09Q]
 The currency also got a brief lift from U.S. data that
showed retail sales rose more than expected in October.
[ID:nCAT005552]
 "The data was markedly better across the board," said Firas
Askari, head of foreign exchange trading at BMO Capital
Markets.
 "It seems to be a market shift in sentiment," he added of
the Canadian dollar's bounce. "The market is looking for any
good news. There is a lot of bad news priced into this
market."
 At 9:00 a.m., (1400 GMT), the Canadian dollar CAD=D3 was
at C$1.0224 versus the greenback, or 97.81 cents, after briefly
popping up to around the C$1.0208 level following the data.
 On Monday, the currency finished at C$1.0169 versus the
greenback, or 98.34 cents U.S.
 Despite the brief reprieve, Askari said there's still "a
large amount of pessimism" in the global markets.
 Top-rated European nations came under increasing pressure
from investors betting that the euro zone could eventually
break up with the yield spread of French, Austrian and Belgian
10-year bonds over German Bunds rising to euro-era highs. The
equivalent Dutch spread hit levels not seen since early 2009.
 Global stocks sank, while the euro dropped. [MKTS/GLOB]
 Markets slipped despite the arrival of new government
leaders in both Italy and Greece, with investors uncertain
about what actions would follow in the two highly indebted
nations.
 "The expectations are that these countries are in dire
straits and a change in leadership doesn't necessarily change
the facts on the ground," said Askari.
 In the near term, Askari said he expected resistance to be
at around C$1.0290 to the U.S. dollar, while support would hold
at C$1.0150.
 BONDS PRICES HIGHER
 Canadian government bond prices were firmly higher,
following the broader market trend that saw U.S. benchmark
10-year yields break 2 percent on euro zone woes. [US/]
 The two-year bond CA2YT=RR edged 2 Canadian cents higher
to yield 0.901 percent, while the 10-year bond CA10YT=RR was
up 11 Canadian cents to yield 2.109 percent.
 (Editing by Jeffrey Hodgson)