May 13, 2011 / 8:31 PM / 9 years ago

CANADA FX DEBT-C$ tracks euro down as growth worries weigh

   * C$ ends at C$0.9687 vs US$, or $1.0323
 * C$ finishes week down 0.2 percent
 * C$ hit 6-week low at C$0.9745 per US$, or $1.0262
 * Bond prices firm on flight to safety
 (Updates to close, adds details, commentary)
 By Claire Sibonney
 TORONTO, May 13 (Reuters) - Canada's dollar hit its weakest
level against the greenback in more than six weeks on Friday,
driven lower by a broad rally in the safe-haven greenback and a
selloff in the euro as worries about global growth mounted.
 The euro, a recent barometer of risk appetite, tumbled
against the U.S. dollar after European Central Bank President
Jean-Claude Trichet spooked investors ahead of a Monday meeting
of Eurogroup finance officials.  [FRX/]
 In an interview on Spanish television, Trichet said that
euro zone inflation was at a peak and the central bank would do
everything necessary to deliver price stability.
 "This week one of the focuses has been the trajectory of
global growth softening a little bit," said Camilla Sutton,
chief currency strategist at Scotia Capital.
 Data on Friday showed the German and French economies
propelled growth in the euro zone well above forecasts in the
first quarter while also highlighting the yawning gap between
the bloc's strong and weak members. [ID:nLDE74C0FI]
 "Even though we had fabulous growth data from the euro
zone, the market just focused on the divergence between core
Europe growth and periphery European growth," Sutton said .
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9687 to the U.S. dollar, or $1.0323, down from
Thursday's close at C$0.9623 to the U.S. dollar, or $1.0395.
The currency ended the week 0.2 percent lower.
 Earlier in the day, the Canadian dollar broke through a key
technical support level around C$0.9720 and fell as low as
C$0.9745 versus the greenback, or $1.0262, its weakest level
since March 30.
 Sutton said the next support level for the currency is the
100-day moving average around C$0.9780.
 Helping to contain the losses for the commodity-linked
currency, oil prices rose in late short-covering, after a
volatile session whipsawed by the European economic concerns
and news that Libyan leader Libyan leader Muammar Gaddafi may
have been wounded. [O/R]
 Sliding stock markets reflected the general risk-off mood
in currency markets. [.N] [.TO] [ID:nN13253808]
 Shaun Osborne, chief currency strategist at TD Securities,
said risk appetite will likely continue to drive the currency
in the near term.
 "We're still in an environment where, fundamentally, the
Canadian dollar can probably outperform on the crosses because
the situation here in Canada is still quite constructive," he
 "The data has been giving us some positive surprises. We
know the economy is doing quite well, we expect the Bank of
Canada to tighten down the road, but a lot of those factors I
think are priced in here.
 Canadian bond prices firmed, tracking the rise in their
U.S. counterpart, helped by stock losses, the U.S. Federal
Reserve Treasury purchases and relief that U.S. inflation
didn't come in above forecast. [US/]
 They underperformed Treasuries across much of the curve
 Canada's two-year bond CA2YT=RR was up 3 Canadian cents
to yield 1.691 percent, while the 10-year bond CA10YT=RR
gained 28 Canadian cents to yield 3.204 percent. The 30-year
bond CA30YT=RR advanced 68 Canadian cents to yield 3.590
 (Editing by Rob Wilson)

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