CANADA FX DEBT-C$ dips with weaker commodity prices

Thu Nov 27, 2008 9:51am EST
 
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 * Canadian dollar dips 0.5 percent versus greenback
 * U.S. markets closed for Thanksgiving Day
 * Bond prices edge lower in illiquid conditions
 By John McCrank
 TORONTO, Nov 27 (Reuters) - The Canadian dollar fell 0.5
percent against the U.S. dollar on Thursday as investors --
with U.S. markets closed for Thanksgiving Day -- focused on
sagging commodity prices.
 Canadian bond prices were lower with tight liquidity
limiting trade.
 At 9:24 a.m. (1424 GMT), the Canadian dollar was at
C$1.2358 to the U.S. dollar, or 80.92 U.S. cents, down from
C$1.2302 to the U.S. dollar, or 81.29 U.S. cents, at
Wednesday's close.
 "With the U.S. equity markets not open, the market will
probably focus on what's going on in the commodity markets,"
said George Davis, chief technical strategist at RBC Capital
Markets.
 Canada is a major exporter of oil and other commodities,
and its currency is often influenced by moves in their prices.
 U.S. crude oil CLc1 fell about $1 to around $53.40 a
barrel on expectations of lower demand due to the global
economic slump.
 The main event for Canada comes after market close with the
release of government's autumn update on the its fiscal
position at 4 p.m. (2100 GMT).
 The Conservative government said recently it will provide
an "unprecedented fiscal stimulus" to shore up the economy as
it slips into recession. However, it is unclear what measures
the finance minister will announce on Thursday.
 "I think it's going to be a pretty downbeat assessment of
the economy," Davis said. "There's been a a lot of talk lately
of the government returning to a deficit position next year in
order to help alleviate the negative impacts of the slowdown."
 BONDS SLIP
 With the much larger U.S. market closed for Thanksgiving
Day, Canadian bond prices unwound some of their recent gains,
largely due to lower liquidity, said Carlos Leitao, chief
economist at Laurentian Bank of Canada.
 He also said bond prices may be influenced by Wednesday's
news that BCE Inc's BCE.TO  C$34.8 billion ($28.3 billion)
leveraged buyout was near collapse after accountants ruled the
post-buyout company would fail a solvency test because of its
huge debt load.
 "People are still trying to figure out what the
repercussions of that will be throughout the Canadian capital
markets," Leitao said.
 There was no major Canadian economic data due on Thursday
beyond the government's fiscal update.
 The Canadian overnight Libor rate LIBOR01 was 2.4417
percent, up from 2.2500 percent on Wednesday.
 Wednesday's CORRA rate CORRA= was 2.2483 percent, up from
2.2390 percent on Tuesday. The Bank of Canada publishes the
previous day's rate at around 9 a.m. daily.
 The two-year bond dipped 2 Canadian cents to C$101.98 to
yield 1.738 percent. The 10-year bond slid 10 Canadian cents to
C$107.05 to yield 3.376 percent.
 The yield spread between the two-year and 10-year bond was
175 basis points, down from 176 at the previous close.
 The 30-year bond shed 10 Canadian cents to C$117.95 to
yield 3.945 percent. In the United States, the 30-year Treasury
yielded 3.622 percent.
 (Editing by Peter Galloway)