CANADA FX DEBT-C$ treads water on Irish deal uncertainty

Mon Nov 22, 2010 4:37pm EST
 
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   * C$ little changed at 98.28 U.S. cents
 * Fears about euro zone debt woes linger
 * Bonds climb across curve
 (Adds comment. Updates to close)
 By Claire Sibonney
 TORONTO, Nov 22 (Reuters) - Canada's dollar was little
changed against the greenback on Monday, as initial enthusiasm
over Ireland's debt bailout gave way to fears about the
government's future and problems elsewhere in the euro zone.
 Ireland's unpopular coalition government began to crumble a
day after agreeing on an EU/IMF bailout, casting doubt on its
ability to push through an austerity budget crucial to
receiving assistance, and weighing on riskier assets.
[ID:nLDE6AL00M]
 "It goes back to the old adage that you buy the rumor and
sell the fact," said David Tulk, senior macro strategist at TD
Securities.
 "There was some tentative optimism last week that the
situation in Ireland would come to a positive resolution and
indeed that did arrive on Sunday and now we're faced with the
fact. We're a little bit more tentative as to what the next leg
down will be."
 Tulk said market focus has shifted to what the details of
the bailout will be. He also pointed out trading volume was
quite thin given the upcoming Thanksgiving holiday in the
United States.
 Also unnerving investors are worries that Ireland's debt
crisis might spread to other euro zone countries such as
Portugal, said Matthew Strauss, senior currency strategist at
RBC Capital.
 "The question is, 'What's next?'... it's hard to see how
Ireland will get the economic growth needed to repay its debts,
especially given the political uncertainty it faces. And given
Portugal's finances, people wonder will it be next?"
  North American stock markets, a barometer of risk
appetite, were also weaker, as were prices for key Canadian
commodities such as oil and base metals.  [.N] [.TO] [O/R]
[MET/L]
 Still, given the global uncertainty, the Canadian dollar
managed to hold its ground, due in part to a strong fiscal
backdrop.
 "If we look at sovereign debt issues Canada actually stands
out as one of the best G10 countries," said Strauss.
 Canadian Finance Minister Jim Flaherty reiterated on Monday
that his next budget will contain no big new spending plans as
government focuses on getting the books back into the black.
[ID:nN22286158]
 The Canadian dollar finished at C$1.0175 to the U.S.
dollar, or 98.28 U.S. cents, slightly up from Friday's close at
C$1.0180 to the U.S. dollar, or 98.23 U.S. cents.
 Strauss said he sees a near-term technical range between
C$1.0063 to the U.S. dollar, a high reached in early October
and key U.S. dollar support level, and resistance at C$1.0253.
 With riskier assets coming back off the table, Canadian
bond prices were firmer across the curve.
 The two-year bond CA2YT=RR yielded 1.609 percent, while
the 10-year bond CA10YT=RR yielded 3.088 percent.
 (Additional reporting by Jennifer Kwan; editing by Jeffrey
Hodgson)