CANADA FX DEBT-Canadian dollar weakens as Greece woes weigh

Thu Apr 22, 2010 8:33am EDT
 
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 * 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)