September 2, 2009 / 1:47 PM / 11 years ago

CANADA FX DEBT-C$ hits two-week low as soft equities weigh

 * C$ slips as low as C$1.1103 to the U.S. dollar
 * Traders await Friday's key jobs data
 * Bonds flat ahead of Fed meeting minutes
 By Frank Pingue
 TORONTO, Sept 2 (Reuters) - Canada's currency hit a
two-week low versus the U.S. dollar on Wednesday, extending the
previous session's sharp skid, as weaker equities weighed on
sentiment heading into Friday's key jobs data.
 The currency is coming off a slide of nearly 1 U.S. cent in
the previous session when economic concerns sent investors into
safe havens like the U.S. greenback while threat of a federal
election also dealt the currency a blow.
 "Obviously we had a monster move yesterday and so I think
the market's probably just trying to feel things out ... but I
do feel like the market would rather be buying U.S. dollars on
dips," said Steve Butler, director of foreign exchange trading
at Scotia Capital.
 "Plus we've still got some reasonable event risks for the
rest of the week, especially Friday's jobs numbers."
 At 9:20 a.m. (1320 GMT), the Canadian unit was at C$1.1102
to the U.S. dollar, or 90.07 U.S. cents, down from C$1.1041 to
the U.S. dollar, or 90.57 U.S. cents, at Tuesday's close.
 The currency weakened as far as C$1.1103, or 90.07, its
lowest level since Aug 19.
 Analysts said the currency may stick in a tight range until
after Friday's key jobs report, which is expected to show
Canada shed 10,000 jobs in August, while the unemployment rate
is pegged to rise to 8.7 percent. U.S. jobs data is also due on
 Butler said the commodity backdrop, often a key influence
on the domestic currency given the nature of Canada's exports,
was not playing as large a role of late as investors were
focused more on moves in equity markets.
 "That's taking a little bit of a back seat to the
equities," said Butler. "Everybody has got this 'oh it's
September and equities are going to collapse' mentality right
now so people are really going to be watching stocks first and
foremost for a little bit of short term direction."
 This week investors have started to question the validity
of an equity rally that has put Toronto stocks about 43 percent
above the five-year low hit in March.
 Canadian bond prices, with no domestic data to influence a
move, were little changed across the curve.
 Bond prices could remain stuck in a tight range until later
in the session when the Federal Open Market Committee meeting
minutes are released at 2:00 p.m. The minutes are watched
closely for a glimpse into the Federal Reserve's thinking on
the economy.
 The two-year bond CA2YT=RR was down 2 Canadian cents at
C$99.50 to yield 1.255 percent, while the 10-year bond
CA10YT=RR was up 5 Canadian cents at C$103.35 to yield 3.343
 The 30-year bond CA30YT=RR rose 10 Canadian cents to
C$119.05 to yield 3.873 percent.
 Canadian bonds were underperforming their U.S. counterparts
across much of the curve. The Canadian 30-year bond yield was
about 29.6 basis points below its U.S. counterpart, compared
with 31.8 basis points on Tuesday.
 (Editing by Jeffrey Hodgson)

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