June 8, 2009 / 1:46 PM / in 11 years

CANADA FX DEBT-C$ weak as oil, world equities slump

 * C$ weaker at 89.28 U.S. cents
 * Domestic housing starts rise in May
 * Bonds mostly lower; follow U.S. Treasuries
 (Adds details, quote)
 By Jennifer Kwan
 TORONTO, June 8 (Reuters) - The Canadian dollar fell
slightly against the greenback on Monday morning as global
equities dropped on speculation the U.S. Federal Reserve may
raise rates sooner than anticipated and the price of oil fell
on a stronger U.S. dollar.
 World stocks fell on Monday as yields on 10-year U.S.
Treasuries hit a seven-month high and the U.S. dollar
strengthened on speculation the Federal Reserve may have to
tighten interest rates sooner than anticipated following U.S.
jobs data late last week. [MKTS/GLOB]
 U.S. stocks opened lower on Monday after three weeks of
gains. [ID:nN08318866]
 Friday's stronger-than-expected U.S. jobs data helped to
fueled speculation about rate moves by the Federal Reserve,
said Paul Ferley, assistant chief economist, Royal Bank of
 "The smaller than expected drop in U.S. employment on
Friday seems to have bolstered confidence in the recovery
taking shape going forward. With that, expectations are growing
that maybe at some point the Fed is going to have to start
reversing the earlier rate cuts," he said.
 In turn, the jobs data have helped to fuel speculation the
U.S. Federal Reserve may increase interest rates sooner than
what was priced into the curve, pushing up yields and boosting
the U.S. currency, said George Davis, chief technical
strategist at RBC Capital Markets.
 At 9:15 a.m. (1315 GMT), the Canadian currency was at
C$1.1201 to the U.S. dollar, or 89.28 U.S. cents, slightly down
from C$1.1190 to the U.S. dollar, or 89.37 U.S. cents at
Friday's session close.
 Also weighing on the Canadian unit was the price of oil
CLc1, which fell towards $67 a barrel on Monday as a stronger
dollar prompted a retreat from a high above $70 hit last week.
 Canadian housing starts rose 9.2 percent in May, slightly
better than expected, and was broadly based and encompassed
both single and multiple segments, the Canada Mortgage and
Housing Corp (CMHC) said on Monday. [ID:nN08273370]
 However, the Canadian dollar was largely unaffected by the
data, economists said.
 Canadian bond prices were mostly lower, in line with U.S.
Treasuries where the two-year U.S. Treasury yields hit
seven-month highs in Europe on Monday.[ID:nL8475367]
 "The Canadian market is following the trend set in the
U.S." said Ferley.
 The benchmark two-year government bond down 12 Canadian
cents to C$99.84 to yield 1.332 percent, while the 10-year bond
fell 15 Canadian cents to C$102.45 to yield 3.457 percent.
 The 30-year bond climbed 30 Canadian cents to C$117.40 to
yield 3.965 percent. The comparable U.S. Treasury issue yielded
4.6179 percent.
 (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)

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