CANADA FX DEBT-C$ tumbles more than a penny on euro zone woes

Fri Nov 26, 2010 10:00am EST
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   * 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.
 "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
 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
 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.
 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)