CANADA FX DEBT-C$ dips but election news plays little part

Fri Mar 25, 2011 5:25pm EDT
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   * C$ slips to $1.0186
 * Bond prices follow U.S. lower on hawkish Plosser
 * Minority Conservative government falls
 TORONTO, March 25 (Reuters) - The Canadian dollar fell
against a broadly firmer U.S. currency on Friday, wounded
mainly by softer oil prices as the fall of Canada's minority
Conservative government in Parliament caused little pain.
 The Canadian dollar was already weakening as the U.S.
dollar gained on a hawkish comment from Philadelphia Federal
Reserve Bank President Charles Plosser. Plosser said the
central bank will have to tighten monetary policy soon to avoid
sowing the seeds of inflation. [ID:nLDE72O1T3]
 Oil prices dipped slightly in choppy, thin trade on Friday
as traders weighed concerns about Middle East unrest and
Libya's conflict as well as worries about demand for oil in
quake-hit Japan and debt-laden Europe. [O/R]
 By the time Canada's government fell at midafternoon,
forcing an election in May, the Canadian dollar was slightly
off its session lows but steady around C$0.9810 to the U.S.
dollar, or $1.0194.
 It finished at C$0.9817 to the U.S. dollar, or $1.0186,
down from Thursday's North American close of C$0.9762 to the
U.S. dollar, or $1.0244.
 The possibility of an election had garnered some attention
in the market earlier in the week but had little impact on
where the Canadian dollar eventually settled.
 "In all honesty, political developments to early May are
likely to be tempests in a teapot and to have no material
impact on (the Canadian dollar)," said David Watt, senior fixed
income and currency strategist RBC Capital Markets.
 The market believes that neither the Conservatives nor the
Liberals, the biggest opposition party, if elected would pursue
policies that would damage the country's economic health and
 "Fundamentals in Canada remain relatively strong. I don't
think any of the parties are willing to compromise that," said
Charles St-Arnaud, Canadian economist and currency strategist
at Nomura Securities International in New York.
 Canadian government bond prices were lower across the
curve, mirroring a selloff in U.S. Treasuries that was
triggered by Plosser's remarks. [US/]
 The two-year bond CA2YT=RR slipped 6 Canadian cents to
yield 1.741 percent, while the 10-year bond CA10YT=RR lost 25
Canadian cents to yield 3.249 percent.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)