March 15, 2011 / 1:55 PM / 9 years ago

CANADA FX DEBT-C$ slides to 1-mth low, bonds surge on Japan

 * C$ pares losses to $1.0093
 * Breach of C$0.9980 may set the stage for run to C$1.0240
 * Bond prices soar on safety bid
 By Ka Yan Ng
 TORONTO, March 15 (Reuters) - The Canadian dollar dived to
its lowest level in more than four weeks against the U.S.
dollar on Tuesday morning as the market rushed to the
safe-haven greenback on growing fears of a radiation
catastrophe in Japan.
 Aversion to risk also drove world stock markets lower with
Japanese equities falling more than 10 percent .N225.
 The price of oil -- a leading factor in the Canadian
dollar's direction -- also dropped sharply. [MKTS/GLOB] [O/R]
 The Canadian dollar fell as low as C$0.9974 to the U.S.
dollar, or $1.0026, its weakest point since Feb. 11, plunging
out of the recent range between C$0.97 and C$0.98 that it had
been locked in for most of the past two weeks.
 By 9:20 a.m. (1320 GMT), the Canadian dollar had pared
losses to C$0.9908 to the U.S. dollar, or $1.0093, down steeply
from Monday's close at C$0.9726 to the U.S. dollar, or
 "The whole stampede into risk aversion is forcing this U.S.
dollar/Canada correction," said Mike O'Neill, managing director
at Knightsbridge Foreign Exchange. He said if the currency
breaches C$0.9980, it could set the stage for a return to
C$1.0240, a level not seen since December.
 He said the Canadian dollar has been "extremely overbought"
for some time, and that a correction has long been overdue.
 Bonds were well-supported by the flight-to-safety bid,
pushing prices higher across the curve. The two-year Canadian
government bond CA2YT=RR surged 25 Canadian cents to yield
1.544 percent, while the 10-year bond CA10YT=RR  advanced 61
Canadian cents to yield 3.148 percent.
 Market players also looked ahead to Tuesday's U.S. Federal
Reserve policy meeting, which was expected to result in no
change in policy stance. The U.S. central bank meeting's
"importance is diminishing" said O'Neill, pointing to the focus
on Japan developments.
  (Reporting by Ka Yan Ng; editing by Peter Galloway)

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