CANADA FX DEBT-C$ hits fresh 2011 low, capping dismal quarter

Fri Sep 30, 2011 5:01pm EDT
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   * Ends at C$1.0482 vs US$, or 95.40 U.S. cents
 * Notches biggest monthly drop since October 2008
 * Month-end, quarter-end flows boost volatility
 * Bond prices rally across curve
 By Andrea Hopkins
 TORONTO, Sept 30 (Reuters) - The Canadian dollar hit fresh
12-month lows against the U.S. dollar on Friday to notch the
largest monthly drop in value since the height of the 2008
financial crisis as global growth concerns dominated.
 Global stocks were set to close their worst quarter in
nearly three years, weighed by nagging concerns about the world
economy and the lack of a credible solution to Europe's debt
crisis, The euro and most commodity prices also fell as
investors' search for safety drove up U.S. government bonds and
the dollar. [MKTS/GLOB]
 Adding to a string of global data that has crushed
growth-related assets in the past three months, China's
manufacturing sector contracted for a third straight month in
September while German retail sales slid at their sharpest pace
in more than four years. [ID:nL3E7KU097] [ID:nL5E7KU0BD]
 The gloom helped push the Canadian dollar more than a cent
lower to hit its weakest point since September 2010. Based on
Bank of Canada closing levels, the currency lost 6.6 percent in
September -- the biggest monthly drop since October 2008 -- and
nearly 8 percent in the third quarter.
 "The high correlation with weakening commodities and
overall global growth concerns are hurting the Canadian dollar.
Now it's a bit of a snowball effect with people getting out of
longer-term positions as well and seeking safe haven in U.S.
dollar," said John Curran, senior vice president at
CanadianForex, a commercial foreign exchange dealing firm.
 The Canadian dollar CAD=D3 ended the session at C$1.0482
to the U.S. dollar, or 95.40 U.S. cents, down from Thursday's
North American close at C$1.0366 to the U.S. dollar, or 96.47
U.S. cents.
 The currency at one point hit C$1.0504, or 95.20 U.S.
cents, its weakest level since Sept. 8, 2010.
 The currency, which slipped below parity with its U.S.
counterpart last week and has continued to lose ground since,
was also under pressure from month-end and quarter-end
rebalancing by institutional investors who suffered stock
market losses in the quarter.
 "The month-end rebalancing flows took their toll on other
currencies as well. Aussie, Canada and Kiwi -- the traditional
risk/commodity currencies -- are taking the brunt of the
punishment here," Curran said.
 Jack Spitz, managing director of foreign exchange at
National Bank Financial, said the weakness of the Canadian
currency was more a story about the strong U.S. dollar than
anything specific to Canada, which has been a relative bright
spot in the global economy.
 "The market, by and large, has been buying the (U.S.)
dollar and if you look at the relative performance of the three
biggest influences on the Canadian dollar -- equities,
commodities and overall volatility -- they are all moving in a
similar direction, and it is all negative for the C$," he
 Economic data out of Canada and the United States had
little market impact, with global focus mostly fixed on the
European debt crisis.
 The Canadian economy grew in July, the second straight
month of expansion, setting the stage for a positive third
quarter after the second-quarter's worrying contraction.
 Bond prices marched higher across the curve. The two-year
Canadian government bond CA2YT=RR was up 11 Canadian cents to
yield 0.887 percent, while the 10-year bond CA10YT=RR gained
61 Canadian cents to yield 2.153 percent.
 (Editing by Jeffrey Hodgson)