CANADA FX DEBT-C$ slides on China growth, bank funding fears

Tue Jun 29, 2010 8:41am EDT
 
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 * C$ touches low of C$1.0510, or 95.15 U.S. cents
 * Bonds firmer as investors shun risk
 By Jennifer Kwan
 TORONTO, June 29 (Reuters) - The Canadian dollar touched
its weakest level in nearly three weeks against the greenback
on Tuesday on worries about China growth and bank repayments to
the European Central Bank.
 World stocks hit a 2-1/2 week low on Tuesday while oil and
the euro also skidded on concern about the funding situation of
banks about to repay 442 billion euros ($545.5 billion) to the
European Central Bank.
 The euro hit a lifetime low against the Swiss franc and an
8 1/2-year trough versus the yen on Tuesday. [MKTS/GLOB]
[FRX/]
 Another factor driving risk aversion overnight was a
statement released on Monday by the Conference Board, citing a
calculation error, analysts said. It corrected China's April
leading economic indicator to reflect a rise of 0.3 percent,
rather than a rise of 1.7 percent.
 "That clearly had a negative impact on global sentiment and
we saw riskier assets selling across the board heavily
impacting your commodity based currencies -- Aussie, Kiwi and
Canada selling off overnight," said Matthew Strauss, senior
currency strategist at RBC Capital Markets.
 While the data is second tier, it highlights the fragility
of the global economic recovery, added Strauss.
 "We do expect China to slowdown but what is uncertain is
how much will the economy slowdown and how quickly will it
slowdown going into the second half of the year," he said.
 "The market is very sensitive to any indication it might
slowdown quicker than anticipated."
 At 8:24 a.m. (1224 GMT), the Canadian dollar was at
C$1.0499 to the U.S. dollar, or 95.25 U.S. cents, down sharply
from Monday's finish at C$1.0358 to the U.S. dollar, or 96.54
U.S. cents. Earlier on Tuesday, it touched a low of C$1.0510 to
the U.S. dollar, it's weakest since June 9.
 Strauss said a key technical level to watch for is C$1.0679
to the U.S. dollar, which is an early June intraday low for the
Canadian currency.
 Canadian government bond prices firmed across the board,
tracking U.S. Treasuries where yields hit a record low on weak
Asian stock performance and euro zone banking worries. [US/]
 The two-year government bond CA2YT=RR was up 5 Canadian
cents to yield 1.478 percent, while the 10-year bond
CA10YT=RR rose 24 Canadian cents to yield 3.137 percent.
 (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)