CANADA FX DEBT-Auto woes hit Canadian dollar, lift bonds

Mon Mar 30, 2009 10:34am EDT
 
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 * Threat of bankruptcy looms on U.S. auto sector
 * C$ hit by risk aversion, session low at 79.72 U.S. cents
 * Bonds win safety bid as stock slump
 * BoC's Carney in focus, lecture at 1905 GMT
 (Updates with bond movement, additional comment)
 TORONTO, March 30 (Reuters) - The Canadian dollar fell hard
to a nearly two-week low against the U.S. currency on Monday
morning, while bonds rallied, on renewed trouble in the U.S.
auto sector.
 World stocks slumped on concerns General Motors Corp GM.N
and Chrysler were edging closer to bankruptcy as their
turnaround plans were rejected. Concerns about the banking
sector in Europe also hit sentiment. For more see
[ID:nLU230709] and [ID:nN29520526].
 At 10:01 a.m. (1401 GMT) the Canadian dollar was at its
lowest point in the session at C$1.2544 to the U.S. dollar, or
79.72 U.S. cents, down from C$1.2374 to the U.S. dollar, or
80.81 U.S. cents, at Friday's close.
 The U.S. dollar is benefiting from "flight-to-safety
buying," which is the main factor pushing down the Canadian
unit, said Sal Guatieri, senior economist at BMO Capital
Markets. "There's fears of GM and Chrysler's possible
bankruptcy."
 The stronger U.S. dollar was also helping to pressure the
price of oil, which fell to around $50 a barrel on Monday amid
the slump in global equity markets. Canada is a major exporter
of oil and the currency often tracks the movement in oil
prices. [ID:nSYD421224]
 Commodity-linked currency cousins, the Australian and New
Zealand dollars, also fell hard, each more than 1 percent
against the greenback on Monday. The pair had strong gains last
week as risk appetite recovered.
 BONDS SURGE
 Canadian government bonds rallied across the curve in a
flight-to-safety bid as the auto sector woes trampled sentiment
in riskier assets such as stocks.
 While the auto industry news will likely be the primary
driver on Monday, Canadian market watchers will also monitor
Bank of Canada Governor Mark Carney's lecture in Edmonton,
Alberta this afternoon.
 Market players are interested in new clues on how the
central bank views the economy as well as any insight into
measures the Bank of Canada may use to prompt the economy from
recession, including pumping money into the financial system.
 "We're much on guard for that. I can't say with confidence
that we'll hear something new but it strikes us as the perfect
opportunity to do so. We've already seen quantitative easing
fully deployed in the U.S.," said Eric Lascelles, chief rates
and economics strategist, at TD Securities.
 "To me this speech holds far more promise than many we've
seen for awhile... But it might even be just another effort to
clarify the definitions of quantitative and credit easing."
 But Lascelles said he was mindful that the Bank of Canada
has said it would reveal its proposed framework for so-called
quantitative and credit easing -- printing money to buy
securities outright on the market -- in late April.
 Market watchers will also be keen for details on this
week's U.S. Federal Reserve purchases of U.S. Treasuries.
 The two-year bond jumped 8 Canadian cents to C$100.24 to
yield 1.139 percent. The 10-year bond gained 62 Canadian cents
to C$107.77 to yield 2.863 percent.
 The 30-year bond surged 90 Canadian cents to C$124.40 to
yield 3.612 percent. The U.S. 30-year bond yielded 3.545
percent.
 (Reporting by Ka Yan Ng and Jennifer Kwan; Editing by Jeffrey
Hodgson)