CANADA FX DEBT-C$ slips past 7-week low as Italy yields surge

Fri Nov 25, 2011 8:24am EST
 
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 * C$ hits low of C$1.0524 vs US$, or 95.02 U.S. cents
  * Canada bond prices ease across the curve
  By Claire Sibonney
  TORONTO, Nov 25 (Reuters) - The Canadian dollar touched
its lowest level in more than 7 weeks against the U.S. dollar
on Friday as record borrowing costs for Italy stoked fears that
the euro zone's spiraling debt crisis would lead to a break-up
of the currency bloc.
 Italy paid a record 6.5 percent to borrow over six months
on Friday and its longer-term borrowing costs soared far above
levels seen as sustainable for public finances, raising the
pressure on Rome's new emergency government. [ID:nL5E7MO3UP]
 Trading was thin for the second day on "Black Friday", the
traditional beginning to the U.S. holiday shopping season,
following a U.S. market holiday on Thursday for Thanksgiving.
 "Markets are going to be fairly illiquid so it could be
either very quiet or very whippy depending on what happens
here," said Matt Perrier, director of foreign exchange sales,
BMO Capital Markets.
 Earlier in the morning, the Canadian dollar CAD=D4
touched a low of C$1.0524 to the U.S. dollar, or 95.02 U.S.
cents, its weakest level since Oct. 5.
 "Italian and Portuguese spreads were widening out, the euro
traded to its lows on the day and that pushed the (U.S. dollar)
higher across the board," said Perrier.
 "It's been a fairly big move by the looks of it this week
so I wouldn't be surprised to see a little bit of (U.S. dollar)
profit-taking on a technical basis ... and see Canada do a
little bit better just on some position squaring and a
correction basis."
 By 8:04 a.m. (1304 GMT), the Canadian currency had
recovered slightly to C$1.0512 to the U.S. dollar, or 95.13
U.S. cents, still below Thursday's North American session close
of C$1.0469, or 95.52 U.S. cents.
 After breaking through C$1.05, the next significant support
level for the Canadian dollar is seen at the October low of
C$1.0658. Bigger picture, the currency eyes resistance back at
C$1.0300-C$1.0350.
 Canadian government bond prices eased across the curve,
alongside U.S. Treasuries. [US/]
Canada's two-year bond CA2YT=RR slipped 4 Canadian cents
to yield 0.927 percent, and the 10-year bond CA10YT=RR was
down 25 Canadian cents to yield 2.079 percent.
(Reporting by Claire Sibonney, Editing by Chizu Nomiyama)