CANADA FX DEBT-C$ tumbles lower on renewed risk aversion

Thu Nov 26, 2009 4:41pm EST
 
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 * Closes at C$1.0605 to the U.S. dollar
 * Unravels Wednesday's 1.2 percent gain
 * Bond prices tilt higher across curve
 (Updates to session close)
 By Frank Pingue
 TORONTO, Nov 26 (Reuters) - Canada's dollar tumbled against
the greenback on Thursday as renewed risk aversion in the wake
of debt worries in Dubai shook the domestic currency of all its
meaty gains from the previous session.
 The skid was triggered by news of debt problems in Dubai,
which sparked widespread concern about the once-booming Gulf
region's financial health and added to the general nervousness
about the state of the world economy. [ID:nGEE5AP167]
 Selling in the Canadian dollar followed a 1.2 percent rally
during Wednesday's session when news that Russia's central bank
said it wants to invest some of its reserves in the currency
prompted a wave of buying.
 "It's really risk-off today and certainly the Dubai news
that broke yesterday seemed to gain a lot of traction
overnight," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 "Everything that was good yesterday was bad today and so we
saw a sharp drop in Canada and it's pretty disappointing after
the Russian news yesterday."
 The Canadian dollar closed at C$1.0605 to the U.S. dollar,
or 94.30 U.S. cents, down from C$1.0455 to the U.S. dollar, or
95.65 U.S. cents, at Wednesday's close.
 Around the midway point of the North American session, the
Canadian dollar fell as low as C$1.0622 to the U.S. dollar, or
94.14 U.S. cents, its lowest level since Nov. 24.
 Also weighing on the currency was the backdrop of gold
prices that retreated from a record high hit earlier on
Thursday and lower oil prices. [GOL/] [O/R] Both are key
Canadian exports whose prices often influence the currency.
 With many U.S. players booked off for the Thanksgiving
holiday on Thursday, Butler said the Canadian dollar could
start heading back down to the C$1.0700-50 level in the near
term.
 BOND PRICES EDGE HIGHER
 Canadian bonds ended slightly higher across the curve as
the debt concerns out of Dubai prompted investors to flee
equities in favor of more secure assets like government debt.
 The S&P/TSX composite index .GSPTSE shed 1.72 percent in
the latest session.
 The two-year Canadian government bond CA2YT=RR rose 9
Canadian cents to C$100.28 to yield 1.108 percent, while the
30-year bond CA30YT=RR rose 50 Canadian cents to C$119.92 to
yield 3.823 percent.
 The Canadian 10-year bond yield was 6.10 basis point below
its U.S. counterpart, compared with 1.10 basis points below on
Wednesday.
 ((frank.pingue@thomsonreuters.com ; +1 416 941-8094; Reuters
Messaging: frank.pingue.reuters.com@reuters.net))
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