CANADA FX DEBT-C$ falls to 2-week low on 'fiscal cliff' anxiety
* C$ ends at C$0.9934 vs US$, or $1.0066 * Bond prices mixed across the curve * U.S. Republicans' 'Plan B' tax bill fails * Canada November CPI data disappoints By Claire Sibonney TORONTO, Dec 21 (Reuters) - The Canadian dollar hit a more than two-week low against its U.S. counterpart on Friday as hopes that a U.S. budget deal would be reached before the new year dissipated and uninspiring domestic economic data added to a cheerless mood in markets. Republican House Speaker John Boehner failed to garner enough votes even from his own party to pass his "Plan B" tax bill late on Thursday. This was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession. Investors' lack of confidence in the prospect of a deal between the White House and Republicans boosted demand for the most liquid government bonds and safe-haven currencies. Meanwhile, data showed Canada's annual inflation rate in November fell to a three-year low, while also showing the economy eked out only a tiny gain in October. "CAD is obviously materially weaker today than where it closed and really most of the move was driven off of fiscal cliff concerns, a little bit of a move on some of the data but not really," said Camilla Sutton, chief currency strategist at Scotiabank. "The data from the U.S. was generally more positive and the data from Canada was somewhat mixed: as-expected GDP and softer inflation. We had a little bit of weakness on that but not material." In the United States, the day's round of data indicated that the economy showed surprising signs of resilience in November as consumer spending rose the most in three years and a gauge of business investment jumped. The Canadian dollar ended the North American session at C$0.9934, or $1.0066, compared with Thursday's finish at C$0.9873 versus the U.S. dollar, or $1.0129. Earlier, the currency hit a session low of C$0.9953, or $1.0047, its weakest level since Dec. 4. Scotiabank's 2013 currency outlook on Friday predicted the Canadian dollar would strengthen to C$0.96, or $1.042, by the end of next year, supported by relatively hawkish monetary policy, a strong fiscal backdrop, and Canada's triple-A credit rating. Looking to next week in particular, Sutton said thin holiday trading volumes could cause awkward price moves, pegging the range between parity and C$0.9820-40. "The overwhelming issue affecting markets this week, including today, is the U.S. fiscal cliff negotiations," said Carlos Leitao, chief economist at Laurentian Bank Securities in Montreal. "Here we are on Dec. 21 and besides being the (Mayan calendar) end of the world, it's also very close to Christmas and most people had expected, that by now, there would already have been a deal. So from that perspective, it's a little disappointing." Canadian government bond prices were mixed across the curve. The two-year bond was up 4 Canadian cents, yielding 1.112 percent, while the benchmark 10-year bond climbed 32 Canadian cents to yield 1.804 percent.
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