CANADA FX DEBT-C$ tumbles more than a penny on euro zone woes
* C$ sharply lower at 97.92 U.S. cents
* Bonds higher on euro zone contagion worries
(Adds details, quote)
By Jennifer Kwan
TORONTO, Nov 26 (Reuters) - The Canadian dollar skidded more than a penny against its U.S. counterpart on Friday with the greenback broadly higher as financial markets were rattled by worries over peripheral euro zone debt.
European officials denied "absolutely false" reports Portugal was under pressure to seek a bailout and Spain ruled out needing help to manage its finances, despite fears of a spreading euro debt crisis. [ID:nLDE6AP08Y]
As well, China warned against military acts near its coastline ahead of U.S.-South Korean naval exercises that North Korea said risked pushing the region towards war. The North shelled a South Korean island earlier this week. [ID:nL3E6MQ058]
"We're going to be taking our cues from the broader U.S. dollar. Today is certainly a day of risk-off and we're seeing that transpire across markets so oil lower, equities lower, U.S. dollar stronger," said Camilla Sutton, chief currency strategist at Scotia Capital.
The Canadian currency CAD=D4 touched a low of C$1.0247 to the U.S. dollar, or 97.59 U.S. cents. At 9:34 a.m. (1434 GMT), it stood at C$1.0212 to the U.S. dollar, or 97.92 U.S. cents, down sharply from Thursday's close at C$1.0097 to the U.S. dollar, or 99.04 U.S. cents.
On Thursday, the currency got a boost from healthy economic data, firm commodity prices and confirmation that Russia has begun adding the currency to its forex reserves.
As well, some strong Canadian economic data, including figures on Tuesday that showed an unexpected jump in inflation, had spurred speculation that the Bank of Canada could resume its rate-hike campaign sooner than recently thought, which might mean more upside for the currency.
But the U.S. dollar "vaulted higher" on Friday in the European session with recent Canadian dollar gains on speculation of future rate hikes being swept away by the negative impact of Korean (and) European events, John Curran, senior vice president at CanadianForex, said in a note to clients.
There has been a lot of positive interest in the Canadian dollar, partially on headlines from the Russian central bank that they were looking at diversifying into into Canada as a reserve asset, said Scotia's Sutton.
"In terms of today ... flows are a little bit light. There's definitively an appetite to buy U.S. dollars," she said, highlighting holiday-thinned trading in the United States.
U.S. stock markets will close at 1 p.m. EST following the U.S. Thanksgiving holiday on Thursday.
Sutton said with no market moving data of note in North America, the Canadian currency was expected to be trapped in its current range of C$1.0085 to the U.S. dollar, a technical resistance level for the Canadian currency, and C$1.0247.
"I suspect we stay in that range for the rest of today," she said.
BONDS EDGE HIGHER
Canadian bonds firmed across the curve, tracking U.S. Treasuries, as prices climbed on mounting speculation Portugal will follow Ireland in seeking bailout funding. [US/]
The two-year government of Canada bond CA2YT=RR rose 5 Canadian cents to yield 1.704 percent, while the 10-year bond CA10YT=RR was up 13 Canadian cents to yield 3.152 percent. (Editing by Jeffrey Hodgson)
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