CANADA FX DEBT-C$ hits 2010 low as investor confidence rattled

Tue Jan 26, 2010 9:37am EST
 
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 * Touches five-week low of C$1.0692, or 93.53 U.S. cents
 * China move to tighten bank lending rattles markets
 * Bond prices firm as investors flee risk
 By Jennifer Kwan
 TORONTO, Jan 26 (Reuters) - The Canadian dollar's fall
against the U.S. currency steepened on Tuesday as investors
shunned risky assets, unnerved by China's clampdown on lending
and as Japan's credit rating was put in the spotlight.
 Beijing ordered some banks to comply immediately with a
planned increase in reserves, rattling global markets and
sending emerging market stocks down more than 2 percent.
[MKTS/GLOB]
 Standard & Poor's added to the sour mood by warning it
would cut Japan's credit rating unless it produced a credible
plan to rein in its soaring debt. [ID:nSGE60P08I]
 "Put together they can have a destabilizing impact on
risk assets for the simple reason that China's position as a
global leader is unparalleled in some way. If we see a slowdown
in their growth performance it will definitely impact the pace
of global economic growth," said Millan Mulraine, economics
strategist at TD Securities.
 The Canadian dollar touched a low C$1.0692 to the U.S.
dollar, or 93.53 U.S. cents, its lowest level since Dec. 21.
 By 9:34 a.m. (1434 GMT), it was at C$1.0690 to the U.S.
dollar, or 93.55 U.S. cents, down from its Monday close at
C$1.0581 to the U.S. dollar, or 94.51 U.S. cents.
 Also weighing on the currency was a weak price for oil,
which dropped toward $74 a barrel in part on the China news,
while gold prices were also softer. [O/R] [GOL/]
 Market watchers said investors would remain wary this week
ahead of key events, including news on whether U.S. Federal
Reserve Chairman Ben Bernanke would win a U.S. Senate vote for
a second term, as well as a rate announcement by the central
bank.
 The market was looking for further market guidance from
U.S. President Barack Obama's State of the Union address on
Wednesday.
 Government bond prices were firmer across the board, as
demand climbed on concern China's clampdown on bank lending
could slow the pace of global recovery. [US/]
 "We have a flight from risk assets to the safety of
government bonds," said Mulraine.
 (Editing by Jeffrey Hodgson)