June 23, 2011 / 8:39 PM / 9 years ago

CANADA FX DEBT-C$ stumbles for 2nd day on bleak U.S. outlook

   * C$ falls to C$0.9780 to the U.S. dollar, or $1.0225
 * Bond prices rally as risk sentiment sours
 * Greece in deal with EU/IMF on austerity plan-sources
 * U.S. jobless claims add to bleak view of U.S. economy
 (Updates to session close)
 TORONTO, June 23 (Reuters) - Canada's dollar eased against
the U.S. currency for a second straight day on Thursday, as a
bleak outlook for the U.S. economy superseded news that Greece
reached a deal on an austerity plan.
 A rise in U.S. weekly jobless claims on Thursday came on
the heels of a bleaker economic growth forecast from the U.S.
Federal Reserve.
 Greece won the consent of international lenders for a
five-year austerity plan intended to avoid debt default,
sources familiar with the talks said, and its prime minister
pledge to push radical economic reforms through parliament.
 But that news was met with some skepticism across risk
markets, where losses were trimmed, not reversed.
 Echoing moves by their U.S. counterparts, Canadian
government bonds held onto gains, despite the late-breaking
news on the Greek austerity plan, as euro zone worries drove
investors out of riskier assets.
 The Canadian dollar CAD=D4 finished at C$0.9780 to the
U.S. dollar, or $1.0225, down from C$0.9731 to the U.S. dollar,
or $1.0276, at Wednesday's close.
 The two-year bond CA2YT=RR gained 13 Canadian cents to
yield 1.450 percent, while the 10-year bond CA10YT=RR climbed
61 Canadian cents to yield 2.908 percent.
 "There is really no reason for us to be getting back into a
risk mode and getting us down towards C$0.97. I think the risk
is definitely for a weaker Canadian, weaker commodities," said
John Curran, senior vice-president at CanadianForex.
 Further pressure on the Canadian dollar came from a steep
drop in the price of oil as the International Energy Agency
said it would release crude from its strategic reserves. Canada
is a net exporter of oil, and the main supplier to the United
States, and the currency often takes its cue from oil prices.
 U.S. employment data on Thursday added to a souring outlook
on the slower U.S. economy, highlighted by the Fed's downgraded
view of economic growth on Wednesday. [ID:nN1E75K22F]
 "There's just more momentum of that, driven by the rising
jobless claims," said Mazen Issa, macro strategist at TD
Securities, noting that new U.S. claims for unemployment
benefits rose above the psychological level of 400,000.
 Initial claims for state unemployment benefits climbed
9,000 to a seasonally adjusted 429,000, U.S. government data
showed. The prior week's figure was revised up to 420,000.
Economists polled by Reuters had forecast claims to edge up to
415,000 from a previously reported count of 414,000.
 "Unless the economy really starts to show a material
improvement on the labor market, I think the Canadian dollar is
going to be very hesitant to grind higher," said Issa.
 Speaking in Lethbridge, Alberta, Bank of Canada Deputy
Governor John Murray repeated the bank's view that economic
growth will be sluggish in the second quarter and gather
momentum in the second half of this year. [ID:nN1E75M1F]
 (Reporting by Ka Yan Ng; editing by Rob Wilson)

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