August 11, 2009 / 8:59 PM / in 11 years

CANADA FX DEBT-C$ sags for fourth straight session

 * C$ closes at C$1.1015 to US$, or 90.79 U.S. cents
 * Touches lowest level since July 22
 * Softer commodity prices, housing data weigh
 * Bond prices extend recent bounce
 (Updates to session close)
 By Frank Pingue and Ka Yan Ng
 TORONTO, Aug 11 (Reuters) - The Canadian dollar closed
lower against the greenback for a fourth straight session on
Tuesday as a drop in commodity prices and an unexpectedly weak
domestic housing report sapped investors' risk appetite.
 At one point, the currency slipped to C$1.1048 to the U.S.
dollar, or 90.51 U.S. cents, its lowest level in nearly three
weeks. It managed to move off the session low but was unable to
snap its latest skid.
 Part of the drag on the Canadian dollar came from a slide
in the price of oil, a key Canadian export, as doubts about the
pace of a global economic recovery weighed on crude prices.
 Also weighing on the currency was a report that showed
Canadian housing starts unexpectedly dropped 4.1 percent in
July after two months of gains. [ID:nN11509601]
 "We saw the Canadian dollar get hit on all fronts today,"
said Tyson Wright, senior foreign exchange trader at Custom
House, a currency services firm in British Columbia.
 "At the same time, these are illiquid summer markets so the
moves aren't too big, but we did pop up over C$1.10 and there
could be some more downside for the Canadian dollar," he said.
 Wright also said the currency was still feeling the effects
of comments made last week by Finance Minister Jim Flaherty,
who said the nation's economic recovery could be hurt by the
rapid rise in the Canadian dollar and that steps could be taken
to slow that rise. [ID:nN04143584]
 The Canadian dollar closed at C$1.1015 to the U.S. dollar,
or 90.79 U.S. cents, down from C$1.0887 to the U.S. dollar, or
91.85 U.S. cents, at Monday's close.
 The currency remains a comfortable 18.6 percent above the
four-year low it hit on March 9, but its latest pullback has
also left it 3.5 percent below the 10-month high it reached
last week, before its latest retreat.
 "There has been no fundamental change or shift in the way
the world views the Canadian economy or the Canadian dollar,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial. "I think it's just simply a technical
retracement and a pullback of risk ahead of a fairly large
slate of data."
 Traders are awaiting Wednesday's policy statement from the
U.S. Federal Reserve and speculated whether upcoming data would
offer further evidence of an economic recovery.
 Canadian bond prices ended higher across the curve for the
second straight session, given a combination of soft equities
and solid demand for a U.S. bond auction that influenced trade
in Canada as well.
 A huge bid by foreign investors galvanized demand at the
record three-year U.S. Treasury note auction, which also helped
to alleviate concerns about waning appetite for U.S. government
debt as the economy starts to recover. [ID:nN11495130]
 Domestic bonds could get some home-grown direction when the
June merchandise trade figures are released on Wednesday. That
will be followed by Friday's June manufacturing sales data.
 Also, Bank of Canada Governor Mark Carney is scheduled to
speak to the Canadian Financial Forum in Beijing at 9:20 p.m
(0120 GMT). Carney will participate in a press conference
scheduled for 1:30 a.m. on Wednesday.
 The two-year Canadian bond rose 14 Canadian cents to
C$99.31 to yield 1.342 percent, while the 10-year bond rose 45
Canadian cents to C$102.07 to yield 3.498 percent.
 The 30-year bond gained 90 Canadian cents to C$116.95 to
yield 3.985 percent. In the United States, the 30-year bond
yielded 4.437 percent.
 Canadian bonds underperformed their U.S. counterparts
across most of the curve. The Canadian 30-year bond was about
45.2 basis points below the U.S. 30-year yield, versus about
48.8 basis points below on Monday.

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