CANADA FX DEBT-C$ tumbles factory data, Greece anxiety

Fri Apr 30, 2010 5:00pm EDT
 
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 * C$ ends at C$1.0158 to the US$, or 98.44 U.S. cents
 * Canada factory prices down in March
 * Bond prices higher across the curve
 (Updates to close, adds quotes)
 By Jennifer Kwan
 TORONTO, April 30 (Reuters) - Canada's dollar dropped a
U.S. cent on Friday, pressured in part by domestic data that
suggested inflation would remain tame and as investors shied
away from risk due to anxiety over euro zone debt levels.
 A report on Friday showed the continued appreciation of the
currency sent Canadian factory prices down in March from
February, which could reduce the pressure off the Bank of
Canada to hike rates sooner. [ID:nSCLUFE613]
 "This morning we got industrial and raw materials price
indexes, and both came in below expectation," said Camilla
Sutton, currency strategist at Scotia Capital.
 "The pricing data this morning just hinted there wasn't as
much pricing pressure in the pipe as some had expected so
putting some downward pressure on CPI expectations."
 Currencies usually strengthen as interest rates rise as
higher rates attract capital flows.
 Earlier, the currency fell to a low of C$1.0179 to the U.S.
dollar, or 98.24 U.S. cents. The Canadian dollar CAD=D4
finished at C$1.0158 to the U.S. dollar, or 98.44 U.S. cents,
down sharply from Thursday's close at C$1.0054 to the U.S.
dollar, or 99.46 U.S. cents.
 The currency was down 1.7 percent for the week, the
steepest weekly drop since late January.
 Also weighing on the currency was a slide in U.S. stocks,
typically a barometer of broader risk appetite.
 U.S. stocks fell on Friday to close out their worst week
since January as news of a criminal probe into Goldman Sachs
GS.N unnerved investors already anxious about the prospects
for heavy banking regulation from Washington. [.N]
 Part of the broader risk aversion is tied to the anxiety
around Greece's fiscal situation, said Sutton.
 "There's certainly a lot of risk going into the weekend,
which would imply that people are covering off their
outstanding positions so creating a short covering in euro and
selling off some of the long Canadian positions," said Sutton.
 The euro rallied against the U.S. dollar on Friday for a
third straight day as expectations that Greece will soon
receive emergency aid helped calm investors concerned how
Athens will pay its huge debts. [FRX/]
 The Canadian currency's move lower came as domestic data
showed Canada's economy grew an as-expected 0.3 percent in
February, its sixth consecutive monthly increase.
[ID:nN30135620]
 BONDS HIGHER
 Canadian bond prices were slightly higher across the curve,
as broader concerns about European sovereign debt levels kept
investors on edge. [US/]
 "It's the general rise in risk aversion. The concerns over
Greece have been keeping Treasury yields low," said Kam Bath,
fixed income strategist at RBC Capital Markets.
 The two-year Canadian government bond CA2YT=RR was up 19
Canadian cents to C$99.29 to yield 1.896 percent, while the
10-year bond CA10YT=RR climbed 75 Canadian cents to C$98.75
to yield 3.650 percent.
 Canadian government bonds mostly outperformed U.S. issues,
with the two-year yield 93 basis points above its U.S.
counterpart, compared with around 95 basis points the previous
session.
 (Editing by Rob Wilson)