CANADA FX DEBT-C$ dips on worry over commodity demand

Wed Nov 26, 2008 4:23pm EST
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 * Canadian dollar slips 0.4 percent versus greenback
 * Bond prices rally with U.S. market on soft U.S. data
 By John McCrank
 TORONTO, Nov 26 (Reuters) - The Canadian dollar dipped 0.4
percent against the U.S. dollar on Wednesday on worries over
slackening demand for Canadian commodities, but it closed well
off its lows for the day as North American stock markets
rebounded and commodity prices made gains.
 Canadian bond prices rallied along with the larger U.S.
market on weaker-than-expected U.S. data, which increased the
allure of safe-haven government debt.
 The Canadian dollar ended the North American session at
C$1.2302 to the U.S. dollar, or 81.29 U.S. cents, down from
C$1.2250 to the U.S. dollar, or 81.63 U.S. cents, at Tuesday's
 At the beginning of the session, the currency weakened to
C$1.2415 to the U.S. dollar, or 80.54 U.S. cents, as U.S.
equity futures plunged on gloomy outlooks from several
 With global growth slowing, concern is growing that demand
for the commodities Canada exports will drop off. In times of
market volatility, such concerns are often reflected in the
value of the Canadian dollar.
 Stock prices started to rise during the session, as did
prices for oil and some other key commodities, and the Canadian
dollar followed suit.
 "Slowly but surely, (the market) miraculously turned around
and the world looks like a fairly safe place again for a
change," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
 The U.S. market is closed on Thursday for Thanksgiving Day,
which could lead to more volatile moves by the Canadian dollar
due to tighter liquidity.
 Bond prices rallied along with the larger U.S. market on a
raft of weaker than expected U.S. economic data, which sent
investors looking for safe-haven government debt.
 The U.S. economic data included another big drop in new
home sales, another plunge in real consumer spending, a big
pullback in durable goods orders, and jobless claims that
remained elevated.
 "Pretty bleak numbers all reaffirming that the U.S. economy
is slipping into a deeper recession," said Sal Guatieri, senior
economist at BMO Capital Markets.
 There were no major Canadian data releases.
 The two-year bond rose 9 Canadian cents to C$102.02 to
yield 1.728 percent. The 10-year bond climbed 35 Canadian cents
to C$107.25 to yield 3.352 percent.
 The yield spread between the two-year and 10-year bond was
176 basis points, up from 171 at the previous close.
 The 30-year bond jumped 80 Canadian cents to C$118.20 to
yield 3.932 percent. In the United States, the 30-year Treasury
yielded 3.932 percent.
 (Editing by Peter Galloway)