May 11, 2010 / 12:18 PM / 10 years ago

CANADA FX DEBT-Canada dollar loses ground as doubts reemerge

   * Canadian dollar at 97.50 U.S. cents
 * Bonds regain favor as doubts renewed
 TORONTO, May 11 (Reuters) - The Canadian dollar edged lower
against the U.S. dollar on Tuesday as the relief rally arising
from the announcement of a massive European rescue deal waned.
 Second thoughts about the "shock and awe" emergency aid
package in Europe drove down riskier assets, which had surged
in the previous session, including the Canadian dollar.
 The commodity-linked Canadian currency's move lower also
coincided with a fall in the price of oil, with U.S. crude
slipping below $76 a barrel. [O/R]
 Still, the currency managed to hold in a range as the euro
remained the center of attention. [FRX/]
 "Right now Canada is a bit of a sideshow," said Jon
Gencher, a director of foreign exchange sales at BMO Capital
 "The market is focused on the euro and the euphoria with
which the market reacted to the package is already fading. The
overwhelming will it be enough to prevent an
eventual debt restructuring?"
 At 8:00 a.m. (1200 GMT), the Canadian dollar CAD=D4 was
at C$1.0256 to the U.S. dollar, or 97.50 U.S. cents, down
slightly from C$1.0243 to the U.S. dollar, or 97.63 U.S. cents,
at Monday's close. It soared almost 2 percent against its U.S.
counterpart on Monday.
 There is no major Canadian or U.S. economic data due on
 Canadian government bond prices gained across the curve as
safe-haven assets found demand after doubts reemerged about
Europe's fiscal woes in spite of a massive aid deal.
 The move tracked U.S. Treasuries, which also rose, as the
rally in world equity markets ran out of steam. [MKTS/GLOB]
 The two-year government bond CA2YT=RR rose 5 Canadian
cents to C$99.19 to yield 1.904 percent, while the 10-year bond
CA10YT=RR shed 35 Canadian cents to C$99.65 to yield 3.542
 (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)

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