CANADA FX DEBT-C$ falls below parity after US, Chinese data

Thu Jan 20, 2011 12:14pm EST
 
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 * C$ hits two-week low of 99.69 U.S. cents
 * Bonds weaker across the curve
 * China, U.S. data weigh; Canadian data shrugged off
 By Ka Yan Ng
 TORONTO, Jan 20 (Reuters) - The Canadian dollar fell below
parity with the greenback on Thursday to its lowest level in
more than two weeks after data showing stronger-than-expected
growth in China spurred fears of tighter monetary policy in the
Asian giant, a key market for Canadian resources.
 Chinese economic growth soared past forecasts to rise by
9.8 percent in the fourth quarter and inflation slowed less
than expected, prompting a sell-off in global equities and
commodities, such as oil, which hurt Canada's resource-linked
currency. [MKTS/GLOB]
 Also, a round of stronger-than-expected U.S. data pushed up
the U.S. dollar at the expense of the Canadian currency. U.S.
jobless claims showed the biggest drop in nearly a year, and
U.S. home resales jumped more than expected in December. The
data rekindled the view of an overall strengthening of the U.S.
economy. [ID:nN20105802]
 At 11:45 a.m. (1645 GMT), the Canadian dollar CAD=D4  was
at C$1.0008 to the U.S. dollar, or 99.92 U.S. cents, down from
Wednesday's North American finish of C$0.9955 to the U.S.
dollar, or $1.0045.
 "We've got a general risk-aversion feel that's going
through markets," said David Watt, senior currency strategist
at RBC Capital Markets.
 "The Canadian dollar was already flirting just below parity
before the U.S. data came out. Even though we got some fairly
good data coming out of Canada it seems to be that the data out
of the U.S. was a little bit more of a dominant factor."
 Statistics Canada said wholesale trade rose 1.2 percent in
November, advancing for the fourth month in a row, while the
composite leading indicator rose 0.5 percent in December. Both
indicators beat expectations. [ID:nN2083816]
 The Canadian dollar hit a low of C$1.0031 against its U.S.
counterpart, or 99.69 U.S. cents -- its weakest level since
Jan. 4 and just a few ticks from its lowest point of 2011 at
C$1.0035 to the U.S. dollar, or 99.65 U.S. cents.
 Weak North American equity markets and a slump in the price
of crude oil also put pressure on the risk-based Canadian
dollar.
 The currency's one-for-one footing with the U.S. dollar
started to falter on Tuesday when dovish language by the Bank
of Canada in its interest-rate statement raised some doubts
about the timing of the next rate hike. [ID:nN18138776]
 "We've seen a significant move in the interest rate spreads
between Canada and the U.S. and that combined with fears over
Chinese tightening monetary policy and how that would impact
growth and commodities is weighing on the Canadian dollar this
morning," said Camilla Sutton, chief currency strategist at
Scotia Capital.
 "Reasonably, we're hovering either side of parity for the
next little bit as we await the next catalyst to take Canada
another leg stronger."
 Canadian government bond prices were pressured across the
curve, tracking U.S. Treasuries, after the U.S. data.
 The two-year bond CA2YT=RR was down 5 Canadian cents to
yield 1.720 percent, while the 10-year bond CA10YT=RR lost 45
Canadian cents to yield 3.287 percent.
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)