CANADA FX DEBT-C$ hits weakest since Oct 2010 in global slump

Thu Sep 22, 2011 4:44pm EDT
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   * C$1.0274 vs US$, or $0.9733
 * Hits weakest level since October, 2010
 * Biggest intraday drop since May, 2010
 * Greenback soars on global fears
 * Bond prices surge, Canada 30-yr yield lowest in decades
 (Updates to close, adds comment)
 By Andrea Hopkins
 TORONTO, Sept 22 (Reuters) - The Canadian dollar tumbled to
an 11-month low against its U.S. counterpart on Thursday, at
one point losing nearly 3 U.S. cents in value, as growing fears
of a global recession sent investors running.
 World stocks and commodities also dropped as weak data from
China crystallized growth fears, one day after a grim economic
outlook from the U.S. Federal Reserve.
 Canadian and U.S. stocks slid more than 3 percent and
commodities took a beating. The U.S. dollar climbed to a
seven-month high against major currencies .DXY as investors
fled risky assets. [MKTS/GLOB]
 "What we've had is the Federal Reserve highlighting that
there are significant downside risks, combined with a sub-50
print from the flash PMI estimate out of China, combined with
ongoing troubles in Europe," said Camilla Sutton, chief
currency strategist at Scotia Capital.
 "These very rapid shifts in risk sentiment have all worked
materially against the Canadian dollar."
 The Canadian dollar CAD=D4 ended the North American
session at C$1.0274 to the U.S. dollar, or 97.33 U.S. cents,
down 2.1 percent from Wednesday's close at C$1.0059 to the U.S.
dollar, or 99.41 U.S. cents.
 The currency had dropped as low as C$1.0362 to the U.S.
dollar, or 96.51 U.S. cents, early in the day, its weakest
point since October 2010. The drop of nearly 3 U.S. cents
marked its biggest intraday decline since May, 2010, according
to Thomson Reuters data.
 Canada's economy has generally been a bright spot amid
global woes, helping to keep the currency above parity with the
greenback for most of 2011. But analysts said it cannot
outperform if its largest trading partner, the United States,
remains in a slump.
 "Once it pierced parity yesterday there was nobody to stand
in the way, so it just took off like a gorilla coming out of
the cage," said David Watt, senior currency strategist at Royal
Bank of Canada.
 The Fed's concern about "significant downside risk" to the
U.S. economy started the market slide on Wednesday, but worries
increased on Thursday when HSBC's China Flash PMI showed the
factory sector shrank for a third consecutive month in
September, pointing to a slowdown in the world's second-largest
economy. [ID:nL3E7KM0C9]
 European woes, which center on protracted sovereign debt
crises in Greece and beyond, remain at the forefront of the
global economic crisis, and Canadian Finance Minister Jim
Flaherty said the Canadian dollar was a victim in the resulting
stampede to the U.S. currency.
 "We see that with the Australian currency and the New
Zealand currency as well. This is the flight to the U.S. dollar
as the world currency. Our currency ... has shown some modest
decline. That's part of this difficulty that we're in right now
that needs to be resolved in Europe," Flaherty told reporters.
 The mood drove investors to seek relative safety in
government bonds, and Canadian long-term debt prices soared
alongside U.S. Treasuries.
 The two-year Canadian government bond CA2YT=RR was up 15
Canadian cents to yield 0.840 percent, while the 10-year bond
CA10YT=RR surged 90 Canadian cents to yield 2.021 percent.
 The yield on the 30-year bond sank to 2.684 percent, a low
not reached in records going back to the 1970s.
 (Additional reporting by Louise Egan in Ottawa; editing by
Jeffrey Hodgson)