August 18, 2009 / 1:50 PM / 11 years ago

CANADA FX DEBT-C$ stuck lower on global economic concerns

 * Stable commodity prices cushion C$ fall
 * C$ coming off third straight lower close
 * Bond prices lower across the curve
 By Frank Pingue
 TORONTO, Aug 18 (Reuters) - Canada's currency was slightly
lower versus the U.S. dollar on Tuesday as concerns about the
global economic recovery offset the benefit offered by stable
prices for key Canadian exports like oil and gold.
 The fall in the Canadian dollar comes on the heels of three
straight lower closes and is being pegged to a renewed bout of
risk aversion after a massive run up from a four-year low that
it had stumbled to in March.
 "Markets were very bullishly oriented for a long period of
time and now questions are is this sustainability to the global
economic rebound as firm as we had thought," said David Watt,
senior currency strategist at RBC Capital Markets.
 "There's still so many questions and with the end of summer
and liquidity so thin, people are just hoping to get through to
Labor Day and we will get more clarity on what the appropriate
direction is."
 At 9:25 a.m. (1325 GMT) the Canadian unit was at C$1.1096
to the U.S. dollar, or 90.12 U.S. cents, down from C$1.1072 to
the U.S. dollar, or 90.32 U.S. cents, at Monday's close.
 Keeping the Canadian currency from falling further was oil
prices that held steady near $67 a barrel given the recovery in
Asian and European stock markets after falling the previous day
to a two week-low. [ID:nSIN440961]
 Gold prices also firmed as the U.S. dollar fell against a
basket of six major currencies and the oil market rebounded to
boost the metal's appeal as an inflation hedge. [ID:nLI62842]
 Canadian bond prices, with no key domestic economic data to
consider, followed the the move in the bigger U.S. Treasury
market and pared losses after a surprise drop in July housing
starts for the United States.
 The U.S. Commerce Department said housing starts fell 1
percent to a seasonally adjusted annual rate of 581,000 units,
well below market expectations. [ID:nN17348766]
 The fall in bond prices unwound some gains made recently as
stock markets sagged and uneasiness about the strength of the
recovery mounted, generating greater demand for more secure
assets like government debt.
 Domestic data showed foreigners bought C$10.51 billion
worth of Canadian securities in June, continuing a recent heavy
investment in bonds and stocks. [ID:N18415061]
 The two-year Canadian bond was down 1 Canadian cent at
C$99.43 to yield 1.288 percent, while the 10-year bond was off
5 Canadian cents at C$102.75 to yield 3.416 percent.
 The 30-year bond slipped 20 Canadian cents to C$118.55 to
yield 3.900 percent. In the United States, the 30-year bond
yielded 4.330 percent.
 (Editing by Theodore d'Afflisio)

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