CANADA FX DEBT-C$ weighed down by soft equities, outlook

Mon Sep 27, 2010 4:38pm EDT
 
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   * C$ ends at 97.25 U.S. cents
 * Bond prices track moves in U.S. market
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, Sept 27 (Reuters) - The Canadian dollar ended
lower against the U.S. currency on Monday, weighed down by
weaker commodity and equity prices, while broader worries about
the pace of U.S. economic recovery kept investors on edge.
 U.S. crude oil futures recovered from early losses to end
marginally higher, but were weighed down for most of the day by
broader concerns over global demand and the economy.  [O/R]
 Gold was largely steady but shied away from the record high
at $1,300 an ounce it reached earlier in the session.
[GOL/]
 Flat to lower U.S. equity markets, typically a barometer of
risk appetite, provided no positive guidance for investors with
U.S. stocks down on Monday following four weeks of gains. [.N]
Toronto's resource heavy index also ended lower. [.TO]
 More generally, the Canadian currency was pressured by
underlying concerns about U.S. economic growth, said Camilla
Sutton, chief currency strategist, Scotia Capital.
 "Canada is stuck here, muddling around not doing a lot of
anything ... Canada is a getting a pullback because it's so
closely tied to the U.S.," said Sutton.
 "As fears have escalated over the U.S. economic profile,
and the market is well aware how closely tied CAD is to the
U.S., it aggravates concerns that Canada could be slowing as
well. That's hurting the currency."
 The Canadian dollar CAD=D3 finished at C$1.0283 to the
U.S. dollar, or 97.25 U.S. cents, down from Friday's finish at
C$1.0256 to the U.S. dollar, or 97.50 U.S. cents.
 Sutton said another reason why the Canadian currency may be
floundering is "we've seen a huge rebuild in speculative CAD
positions" recently.
 "That rebuilding could have been part of why we saw some
rally," she said. "Now that they've been rebuilt, it hints that
there's not a lot in markets that is new that is pushing market
participants to go even further long Canada."
 She said technical levels to watch for this week include
support at C$1.01 to the U.S. dollar and resistance at C$1.03.
 BONDS FIRMER
 With no economic data to speak of, Canadian bond prices
were slightly higher across the curve, tracking gains by U.S.
Treasuries, said Kam Bath, fixed income strategist at RBC
Capital Markets.
 U.S. debt prices rose as renewed worries about the finances
of some smaller European countries fueled a safe-haven bid and
strong demand for government debt. [US/]
 The two-year bond was up 10 Canadian cents to yield 1.416
percent, while the 10-year bond rose 65 Canadian cents to yield
2.791 percent.
 Canadian bonds mostly outperformed against U.S. Treasuries
across the curve, with the exception of the long end.
 (Reporting by Jennifer Kwan; editing by Rob Wilson)