CANADA FX DEBT-C$ falls as caution and commodities weigh

Mon Sep 21, 2009 4:43pm EDT
 
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 * C$ ends down at 92.81 U.S. cents
 * Fed, G20 meetings in focus
 * Bonds lower, await Fed, wave of supply
 (Updates to close)
 By Ka Yan Ng
 TORONTO, Sept 21 (Reuters) - The Canadian dollar fell
against a broadly firmer U.S. currency on Monday, weighed down
by lower commodity prices and weakening stock markets.
 The currency recovered from session lows, tracking a
similar turnaround by Toronto's main stock index. [.TO]  But it
was still under pressure from commodities, a reflection on
Canada's resource-based economy.
 The price of oil CLc1, a key Canadian export, fell below
$70 a barrel, while gold remained well off 18-month highs but
made its way back above $1,000 an ounce. [O/R] [GOL/] [MET/L]
 The Canadian dollar ended at C$1.0775 to the U.S. dollar,
or 92.81 U.S. cents, down from C$1.0697 to the U.S. dollar, or
93.48 U.S. cents at Friday's close. During the session it
dipped as low as C$1.0855 to the U.S. dollar, or 92.12 U.S.
cents.
 The mood in currency markets was cautious ahead of this
week's G20 summit and a two-day U.S. Federal Reserve meeting.
The U.S. dollar rose as investors reduced bets against the
greenback ahead of the monetary policy meeting by the U.S.
central bank. [FRX/]
 "Going into this week the risks were biased towards the
U.S. dollar probably seeing a bit of a reprieve and that is
part of what we're seeing today," said David Watt, senior
currency strategist, at RBC Capital Markets.
 The Fed is likely to hold rates steady at its meeting,
which starts on Tuesday, but markets are still eager to know if
the central bank will soon unwind some stimulus programs due to
a pickup in economic data.
 "(The exit strategy) has a lot of people somewhat wary,
especially given the extent of U.S. dollar shorts. So that's
one of the reasons why we have been watching for the
possibility that the U.S. dollar get a bit of reprieve," Watt
said.
 Later in the week, leaders from the Group of 20 nations
will meet in Pittsburgh. Among major issues expected to be
discussed will be bankers' pay and the need to examine
strategies for withdrawing state stimulus. [ID:nLH78576]
 BONDS MOSTLY FALL
 Without much economic data to guide trading, most Canadian
bond prices followed their U.S. counterparts [US/] lower as new
debt supply loomed.
 Investors are on guard for a near record $112 billion in
shorter-dated U.S. Treasury issues due this week, as well as
comments about the economy following the Fed meeting.
 Prices were higher across the curve to start the day when
stock markets held deeper losses.
 The two-year bond CA2YT=RR was the only advancer, as it
edged up 1 Canadian cent to C$99.46 to yield 1.283 percent. The
10-year bond CA10YT=RR fell 14 Canadian cents to C$102.76 to
yield 3.412 percent. The 30-year bond CA30YT=RR dropped 37
Canadian cents to C$117.93 to yield 3.931 percent.
 Canadian bonds mostly underperformed their U.S.
counterparts across the curve. The Canadian 10-year bond yield
moved to 7.2 basis points below its U.S. counterpart, compared
with 7.4 basis points at the previous close.
 A report on Monday showing foreign investors reduced their
overall holdings of Canadian securities in July had little
impact on the market. The report also showed that foreign
investment in bonds so far this year is at record-breaking
levels.
 (Reporting by Ka Yan Ng; editing by Rob Wilson)