CANADA FX DEBT-C$ falls as US worry sharpens global debt woes

Mon Nov 21, 2011 4:50pm EST
 
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 * Ends at C$1.0378 vs US$, or 96.36 U.S. cents
 * C$ hits low of C$1.0419 vs US$, or 95.98 U.S. cents
 * Weakest level since Oct. 7
 * Bond prices climb across curve
 (Updates to close, adds comments)
 By Jennifer Kwan
 TORONTO, Nov 21 (Reuters) - The Canadian dollar fell
against the U.S. currency on Monday as fears about government
debt in the United States added to the high anxiety about
Europe and spurred another flight to safe-haven assets.
 In the United States, after months of talks, the
high-profile bipartisan congressional effort to rein in the
ballooning U.S. debt was expected to end in failure with
negotiators set to announce they could not bridge deep divides
over taxes and spending cuts. [ID:nN1E7AK00C]
   Meantime, risk premiums on Spanish, Italian, French and
Belgian government bonds rose as investors fled to safe-haven
German Bunds. European shares .FTEU3 fell more than 3 percent
after Moody's warned that France's credit rating faced new
dangers.  [GVD/EUR] [MKTS/GLOB] [ID:nL5E7ML0SG]
 "It's a global risk-off move right now," said David Tulk,
chief Canada macro strategist at TD Securities.
 "Investors are at a point where they prefer U.S. dollars at
the expense of other currencies. Unfortunately, the Canadian
dollar is caught up in the cross-fire."
 The Canadian dollar  CAD=D4 ended the session at C$1.0378
versus the U.S. dollar, or 96.36 U.S. cents, falling nearly a
penny from Friday's North American close of C$1.0272, or 97.35
U.S. cents.
 Through the day the currency swung a fairly wide range from
a low of C$1.0419 to the greenback, or 95.98 U.S. cents, its
weakest point since Oct. 7, to a high of C$1.0270, or 97.37
U.S. cents.
 Camilla Sutton, chief currency strategist at Scotia
Capital, said the Canadian dollar had managed to pierce a
trading range that it had clung to for weeks.
 "From here, it gets more psychological than anything,"
Sutton said, noting levels of C$1.05 and C$1.06 would be key
milestones.
 "We're in a very volatile environment right now and I think
the outlook for Europe is deteriorating fairly rapidly, and I
think that it's playing havoc with risk aversion."
 BONDS CLIMB
 Canadian government bond prices rose alongside U.S.
Treasuries on Monday as stock market losses and the
difficulties of some euro zone countries to sell debt in
capital markets ignited a rush to safety. [US/]
 "It's the flip side off that risk-off trade where investors
are seeking the safety of U.S. Treasuries and, to a lesser
degree, Canadian government bonds," TD's Tulk said.
 "We're looking at yields down across the board."
 The two-year bond CA2YT=RR added 2 Canadian cents to
yield 0.903 percent, while the 10-year bond CA10YT=RR rose 23
Canadian cents to yield 2.105 percent.
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)