June 6, 2011 / 8:43 PM / 9 years ago

CANADA FX DEBT-C$ weighed down by economic growth concerns

   * C$ falls to C$0.9808 vs US$ or $1.0196
 * Worries about U.S. economy weigh
 * Bond prices flat to lower
 (Updates to close, adds comments)
 By John McCrank
 TORONTO, June 6 (Reuters) - Canada's dollar fell against
the U.S. currency on Monday as doubts about the economic
resilience of the United States weighed, sending oil prices
lower and boosting risk aversion.
 The price of U.S. crude oil slid more than 1 percent to
settle at a two-week low of $99.01 a barrel on worries of
slowing economic growth prospects. [O/R] [ID:nN06282849]
 Canada is the No. 1 oil exporter to the United States,
which absorbs around three-quarters of all Canadian exports and
is the country's largest trading partner by far.
 "Canada is so tied into the U.S. economy that any weakness
in the U.S. economy is by fault weakness for Canada and so the
market plays the Canadian dollar on the back of that," said
Camilla Sutton, chief currency strategist at Scotia Capital.
 The Toronto Stock Exchange's main index tumbled 1.47
percent on Monday in a broad-based decline led by energy
producers and Wall Street's benchmark S&P 500 index hit a more
than two-month low on global growth concerns. [.TO] [.N]
 Sutton pointed to a string of weak U.S. data, topped off by
a report on Friday that showed U.S. nonfarm payrolls rose far
less than expected in May and the U.S. jobless rate climbed to
9.1 percent. The Canadian dollar sank to its weakest level
since March 21 after the data was released.
 The U.S. dollar rallied in March, but has had a lackluster
performance since then and Canada's dollar is one of the only
major currencies that has not been able to make up its losses
versus the greenback.
 The Canadian dollar [CAD=D4] ended the North American
session at C$0.9808 to the U.S. dollar, or $1.0196, down from a
close of C$0.9783, or $1.0222, on Friday. The currency traded
in a range of C$98.16 to C$97.69.
 Against the euro, it fell as low as $1.4368, its weakest
point since February 2010, before making up some lost ground.
 Market players have been pushing out their forecasts for
when the Bank of Canada will resume raising interest rates as
North American economic data has generally disappointed. The
central bank increased rates three times last year, stopping in
September at 1 percent.
 A recent Reuters poll of primary dealers showed that they
expect Canadian interest rates to rise in September. [CA/POLL]
A poll a month earlier forecast the Bank of Canada would resume
tightening in July.
 Adding to concerns about the outlook for North American
growth, a report on Monday showed that the value of Canadian
building permits plunged 21.1 percent in April. The market had
expected a 6.0 percent decline. [ID:nN06254333]
 The housing report contrasted with data that showed
purchasing activity in Canada rose more than expected in May.
Economists said that while the manufacturing sector could see
continued expansion in coming months, global headwinds would
likely temper the growth. [ID:N06273476]
 Market players will turn their focus to Canadian data on
trade and employment later in the week. [ECONCA]
 The Canadian government presented its budget after the
market close on Monday.
 The budget was a non-event for the currency market as it
was largely the same as the one introduced in March. The
minority Conservative government was brought down before that
one could be passed. The Conservatives won a majority in the
May election and passage of their budget is now assured.
 Canada's two-year bond [CA2YT=RR] was flat, yielding 1.433
percent, while the 10-year bond [CA10YT=RR] was down 8 Canadian
cents to yield 3.005 percent.
 The move reflected a partial correction from a fairly hefty
rally last week when risk aversion helped power a safe-haven
bid for government debt, said Doug Porter, deputy chief
economist at BMO Capital Markets.
 (Reporting by John McCrank; editing by Rob Wilson)

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