CANADA FX DEBT-C$ eases, bonds up on Europe debt, rate views

Tue May 24, 2011 8:28am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

 * C$ slips to C$0.9780 to the U.S. dollar, or $1.0225
 * Bond prices rise
 * Markets reassessing Bank of Canada rate moves
 TORONTO, May 24 (Reuters) - The Canadian dollar weakened
against the U.S. currency on Tuesday while bond prices rose, as
European debt concerns weighed again with a new round of
 Rating agency Moody's said a Greek debt default would put
Portugal and Ireland at risk of multi-notch credit downgrades.
For details, see [ID:nLDE74N0AQ]
 That followed concerns on Monday that a Greek debt default
could drag a new group of countries -- including Group of Eight
member Italy -- into trouble.
 At 8:10 a.m. (1210 GMT), the Canadian dollar CAD=D4 was
at C$0.9780 to the U.S. dollar, or $1.0225, down from C$0.9730
to the U.S. dollar, or $1.0277, at Friday's close.
 Canadian financial markets were shut Monday for Victoria
Day. The currency had traded as low as C$0.9810 to the U.S.
dollar, or $1.0194, its lowest in eight weeks, Reuters data
 "It's had a few tough days," said Camilla Sutton, chief
currency strategist at Scotia Capital. "I think it's really
just taking its cue from broader markets."
 With no Canadian data due this week, market players will
have little else to help shape interest rate expectations ahead
of the Bank of Canada's May 31 policy decision.
 However, market participants have gradually revised their
Bank of Canada interest rates expectations further into the
year as data has been patchy and on renewed global growth
concerns, sending the currency lower and short-dated bond
prices sharply higher.
 Canada's two-year bond CA2YT=RR, particularly sensitive
to Bank of Canada rate moves, jumped 10 Canadian cents to yield
1.609 percent. The 10-year bond CA10YT=RR rose 12 Canadian
cents to yield 3.133 percent.
 Overnight index swaps, which trade based on expectations
for the central bank's key policy rate, showed traders cut bets
on rate hikes at every Bank of Canada announcement date from
July to December. BOCWATCH
 Almost no one expects the central bank to hike rates at its
next policy setting on May 31. [CA/POLL]
 "We still have a lot of hurdles ahead, and certainly the
volatility we're seeing coming out of Europe right now would be
concerning for central banks," said Sutton.
 "If you combine that with some evidence of a slower growth
trajectory out of Asia and the U.S., it's not particularly
  (Reporting by Ka Yan Ng; editing by Jeffrey Benkoe)