CANADA FX DEBT-C$ ends flat, election risk grows

Tue Mar 22, 2011 5:20pm EDT
 
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 * C$ ends nearly unchanged at $1.0207
 * Currency slips after NDP says it will not support budget
 * Bonds mildly higher across curve
 * Canada budget offers concessions to opposition
 (Adds details)
 By Ka Yan Ng and Solarina Ho
 TORONTO, March 22 (Reuters) - The Canadian dollar finished
flat against the U.S. currency after the country's minority
Conservative government released its 2011-12 budget on Tuesday
with a host of treats offered to opposition parties in the hope
of avoiding an election.
 But the three opposition parties all said they would vote
against the plan, likely forcing the Conservatives into an
election in May unless they change the budget.
 The currency CAD=D4 closed at C$0.9799 to the U.S.
dollar, or $1.0205, little changed from its Monday close of
C$0.9797, or $1.0207.
 But it later edged as low as C$0.9815 to the U.S. dollar,
or $1.0188, after the New Democratic Party joined the Liberals
and Bloc Quebecois in rejecting the budget.
 In the budget, the Conservatives pledged to slice the
deficit by a quarter this year and return to surplus in 2015.
[ID:nCFB004022]
 "All in all, it looks like a budget that's not making major
changes and certainly not trying to make enemies. The real test
for the Canadian dollar is just the palatibility to the other
parties," said Camilla Sutton, chief currency strategist at
Scotia Capital.
  The minority Conservative government looks set to face at
least two parliamentary confidence votes this week and the
chances of it surviving beyond Friday are uncertain at best.
 Canadian bond prices were little changed following the
budget, holding gains across the curve as North American stock
markets were slightly softer on the day.
 The two-year bond CA2YT=RR was up 2 Canadian cents to
yield 1.673 percent, while the 10-year bond CA10YT=RR gained
22 Canadian cents to yield 3.190 percent.
 (Reporting by Ka Yan Ng and Solarina Ho; editing by Peter
Galloway)