CANADA FX DEBT-C$ turns lower as risk appetite fades

Fri Aug 28, 2009 12:42pm EDT
 
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 * C$ at C$1.0898 to the U.S. dollar
 * Current account deficit hits record
 * Bond prices lower across curve
 (Adds details, comments)
 TORONTO, Aug 28 (Reuters) - The Canadian dollar gave up
early gains to slip lower against the greenback around midday
on Friday as stock markets retreated on weak U.S. economic data
while month-end flows also took their toll.
 The turn lower came as investors shied away from riskier
assets after data showed U.S. consumer confidence fell to its
lowest level in four months [ID:nN28358241], helping to drag
down North American equities after a higher open.
 At 12:20 p.m. (1620 GMT), the Canadian unit was at C$1.0898
to the U.S. dollar, or 91.76 U.S. cents, down from C$1.0856 to
the U.S. dollar, or 92.11 U.S. cents, at Thursday's close.
 The currency was also knocked around earlier in the session
after data showed Canada's current account deficit ballooned in
the second quarter to a record high of C$11.2 billion as
exports to the United States plunged [ID:N28361847].
 "It's not really a huge bit of data and we are at that time
of the month where it's all about month-end flows," said Steve
Butler, director of foreign exchange trading at Scotia Capital.
"But I think we are going to keep a close eye on what happens
to equities today -- but really it's all about the flows."
 The fall by the Canadian dollar was cushioned by the price
of oil, which rallied above $73 a barrel [ID:nSP440141]. Canada
is a major energy exporter and oil price moves often have big
influence on the currency's direction.
 Earlier in the session, the currency extended the previous
day's gains to move higher, finding support from firm oil
prices and equity markets.
 Thin trading conditions ahead of the weekend are likely to
prevail and contribute to volatility, analysts said.
 Around mid-morning, Canada said it plans to issue a U.S.
dollar denominated global bond in the near future. But analysts
said they did not see the move as directly linked to an attempt
by Ottawa to slow the rise of currency. [ID:nN28386471]
 BOND PRICES MIXED
 Canadian bond prices pared early losses and were flat
across the curve as the weak reading on U.S. consumer sentiment
fueled doubts about an economic recovery and helped revive a
safety bid for bonds.
 The two-year bond CA2YT=RR was flat at C$99.44 to yield
1.287 percent, while the 10-year bond CA10YT=RR was down 5
Canadian cents at C$102.90 to yield 3.397 percent.
 The 30-year bond CA30YT=RR was down 15 Canadian cents at
C$118.40 to yield 3.907 percent. The comparable U.S. bond
yielded 4.203 percent.
 (Reporting by Frank Pingue and Ka Yan Ng; editing by Rob
Wilson)