CANADA FX DEBT-Canadian dollar weakens as Greece woes weigh
* C$ slips to C$1.0009, or 99.91 U.S. cents
* Bonds prices rise on risk aversion
By Claire Sibonney
TORONTO, April 22 (Reuters) - The Canadian dollar fell slightly against its U.S. counterpart on Thursday as risk aversion returned over persistent worries of fiscal sustainability in Greece.
Data showed Greece's budget deficit was worse than previously thought, highlighting the market's hunger for a speedy resolution to its debt crisis. [ID:nLDE63L12B]
"That has reemerged as the big issue and the big driving force right now behind the risk aversion that we're seeing in the market more generally," said Millan Mulraine, economics strategist at TD Securities.
Still, the Canadian dollar danced around parity for a third straight session ahead of the Bank of Canada's Monetary Policy Report.
The currency CAD=D4 touched a high of C$0.9961, or $1.0039, supported by the lingering impact of the Bank of Canada's signal it could raise rates soon.
The central bank on Tuesday became the first in the Group of Seven countries to hint it may raise interest rates, possibly as early as June 1. [ID:nN20257669] [ID:nN20103790] Currencies usually strengthen as interest rates rise because higher rates tend to attract capital flows.
"Markets to some extent we believe have already priced in a monetary policy tightening by the Bank of Canada, correctly so," added Mulraine.
"We think the negative sentiment we are seeing emerging from global investors from the fiscal situation in Greece is putting a damper on more risk assets and risk currencies like the Canadian dollar.
At 8 a.m. (1200 GMT), the Canadian currency CAD=D4 was at C$1.0009, or 99.91 U.S. cents, down from Wednesday's finish at C$0.9992 to the U.S. dollar, or $1.0008. Earlier on Wednesday, it rose as high as C$0.9931 to the U.S. dollar, or $1.0069 U.S. cents, its strongest level since June 2008.
With risk appetite subsiding, Canadian bond prices rose across the curve, reversing an earlier trend of weaknening after the rate announcement on expectations of a higher rate environment.
The two-year government bond CA2YT=RR was up 6 Canadian cents at C$99.070 to yield 2.014 percent, while the 10-year bond CA10YT=RR added 4 Canadian cents to trade at C$100.280 and yield 3.714 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
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