August 2, 2011 / 8:53 PM / in 9 years

CANADA FX DEBT-C$ hits two-week low on global growth fears

 * C$ falls to $0.9602 to U.S. dollar, or $1.0414
 * Hits lowest since July 18 after U.S. deal, economic woes
 * U.S. consumer spending falls unexpectedly
 * Bond prices gain in safe-haven bid
 By Andrea Hopkins
 TORONTO, Aug 2 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday after grim economic data from
Washington raised fears of a double-dip recession there,
sending investors to traditional safe havens like the Swiss
franc, gold and bonds.
 Canada's dollar fell to its weakest level since July 18
early in the session after U.S. data showed consumer spending
fell in June, adding to a sell-off of the currency that came
after the U.S. budget deal.
 Two straight days of weak U.S. data suggested Canada's
largest trading partner may be stuck in economic malaise,
overshadowing relief investors felt after a weekend deal by
U.S. lawmakers that averted a U.S. debt default.
 "We're generally caught up in angst over global growth. The
debt limit issue in the U.S. was seen as a bit of a sideshow
but the lingering concerns now is the faltering growth in the
U.S., as well as a number of other risk factors," said David
Watt, senior currency strategist at RBC Capital Markets.
 "We're are looking at the performance of our major trading
partner and it's not doing all that great at the present time.
People are talking about the probability of another
 The Canadian currency ended the session at $0.9602 to the
U.S. dollar, or $1.0414, down from Friday's close of C$0.9555,
or $1.0466. Canadian markets were closed on Monday for a civic
 The currency reached C$0.9619, its weakest point since July
18, after U.S. data showed consumer spending fell unexpectedly
in June, dimming growth prospects.
 Slowing global growth will make it hard for Canada's
export-oriented economy to gain traction, making it less likely
that the Bank of Canada will raise rates in 2011.
 An 11th-hour deal to raise the U.S. debt ceiling cleared
its biggest hurdle in the House of Representatives, staving off
the prospect of a calamitous default but failing to allay fears
that Washington could still lose its coveted triple-A credit
rating. [ID:nN1E76U0F5]
 Watt said unexpectedly weak U.S. data, together with the
temporary nature of the U.S. budget fix, has sent investors to
gold, bonds and the Swiss franc, which he said has become the
de facto safe-haven currency.
 The Swiss franc soared to record highs against the dollar
and euro, with more gains seen likely as investors fretted
about sluggish global growth and debt loads in the United
States and Europe. [ID:nN1E7711L1]
 A U.S. government report on Tuesday showed consumer
spending dropped in June for the first time in nearly two years
as incomes barely rose, suggesting economic growth could remain
subdued in the third quarter. [ID: nN1E7710A7]
 Stock markets also took a beating in the wake of the U.S.
budget deal, with Toronto's main stock index hitting its worst
level in more than eight months. [.TO]
 Canadian bond prices rallied, tracking U.S. Treasuries
higher on worries over economic growth and the outcome of U.S.
deficit wrangling. [US/]
 The two-year Canadian government bond CA2YT=RR rose 28.5
Canadian cents to yield 1.253 percent, while the 10-year bond
CA10YT=RR jumped C$1.38 to yield 2.627 percent.
 A wealth of data is due out this week in both Canada and
the United States, including much-watched employment reports
for both countries on Friday.
 (Editing by Jeffrey Hodgson)

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