March 27, 2009 / 8:55 PM / 8 years ago

CANADA FX DEBT-Risk aversion drags on C$, bonds down

4 Min Read

* C$ slides to 80.81 U.S. cents

* Currency ends flat from prior week

* Focus on BoC governor's two appearances next week (Adds details)

TORONTO, March 27 (Reuters) - The Canadian dollar fell against the U.S. currency on Friday as risk aversion grew amid weakening stock markets and the retreating price of oil.

Part of the U.S. dollar's renewed rise came at the expense of an aggressive selloff of the euro, which was pressured by comments from the German finance minister, who suggested fiscal irresponsibility in Europe could put the euro at risk. [ID:nN27517921]

The Canadian currency finished at C$1.2374 to the U.S. dollar, or 80.81 U.S. cents, down from C$1.2289 to the U.S. dollar, or 81.37 U.S. cents, at Thursday's close. It ended the week flat from the previous week.

"It does seem like, at least over the short term, that sentiment has shifted a little bit more bearish towards the Canadian dollar than what we've seen for all of this week," said George Davis, chief foreign exchange technical analyst at RBC Capital Markets.

"The performance of equity markets and the commodity markets hasn't helped either. They've had a rough day. As a result, the backdrop for the Canadian dollar hasn't been very positive today."

Crude oil dropped about 4 percent to near $52 a barrel. Canada is a major exporter of oil and the currency often tracks the commodity. The fading oil price contributed to a fall of nearly 2 percent in the Toronto Stock Exchange's resource-heavy index.

Lately, equity and commodity markets have served as a barometer of risk sentiment for the Canadian dollar. But neither market has been able to convincingly pull the currency out of the range of C$1.22-C$1.24 to the U.S. dollar it has been held in all week. It veered to the weaker end of that range on Friday, hitting a low at C$1.2445 to the U.S. dollar, or 80.35 U.S. cents, before trimming losses.

Bonds Fall

Canadian government bonds were lower across the curve as interest waned after the U.S. Federal Reserve's second purchase of government bonds. [ID:nNYE000548]

With a huge week of supply and a dearth of data now behind the market, Canadian bonds may next focus on Bank of Canada Governor Mark Carney for new clues on how the central bank views the economy and if he will divulge any measures to lift it from recession during two appearances next week.

One of Carney's appearance will be a lecture on Monday to the University of Alberta School of Business on "What Are Banks For?". That will be followed by a speech on Wednesday in Yellowknife, Northwest Territories, to the Chamber of Commerce.

The two-year bond dipped 1 Canadian cent to C$100.15 to yield 1.179 percent. The 10-year bond fell 34 Canadian cents to C$107.16 to yield 2.930 percent.

The 30-year bond lost 20 Canadian cents to C$123.50 to yield 3.657 percent. The U.S. 30-year bond yielded 3.614 percent.

Canada bonds underperformed mostly across the curve. The 30-year bond yield was 4.3 basis points above its U.S. counterpart, compared with 0.8 basis points below on Thursday. (Reporting by Ka Yan Ng; editing by Rob Wilson)

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