October 3, 2011 / 1:08 PM / in 9 years

CANADA FX DEBT-C$ weakens to 2011 low, eye on Europe

 * C$1.0494 vs US dollar, or 95.29 U.S cents
 * Bond prices higher across the curve
 By Andrea Hopkins
 TORONTO, Oct 3 (Reuters) - The Canadian dollar weakened to
a 2011 low against the U.S dollar on Monday as fresh worries
about the European debt crisis contributed to skittish
 World stocks kicked off the last quarter of 2011 lower
while the yen and core government bonds rose as concerns grew
over the impact a Greek default would have on Europe's banks
after Athens admitted it will miss deficit targets.
 U.S. stock index futures were modestly lower as concerns
over Greece's teetering finances returned to the forefront and
after equities ended their worst quarter since 2008. [.N]
 "As with most of the majors, we're taking our cue from
general risk appetite, so the dollar-CAD popped up through
C$1.05 earlier in the day when risk appetite was at its worst,
and it subsequently pulled back as we've had a little bit of a
bounce in risk appetite," said Adam Cole, global head of FX
strategy at RBC Capital Markets in London.
 "There really isn't much domestically Canadian going on and
we're just trading where the S&P futures dictate."
 At 8:51 a.m. (1251 GMT), the Canadian dollar CAD=D3 stood
at C$1.0494 to the U.S. dollar, or 95.29 U.S. cents, little
changed from Friday's close at C$1.0482 to the U.S. dollar, or
95.40 U.S. cents.
 It earlier hit C$1.0524, its weakest level since September,
 Cole said the currency should trade in a range between
C$1.04-C$1.0525, representing Friday's high and the overnight
low, respectively, "unless we see a really big sell off in
equity markets."
 He said the focus remained on Europe, with little news on
the economic front in Canada until employment data is released
on Friday. ECONCA
 Draft budget figures showed Greece would miss its deficit
targets for both this year and next, which could force the
country to seek more bailout funds. If it fails to get the
financing, the government may be forced to default, an outcome
that could accelerate a slide back into global recession. For
details, see [ID:nL5E7L20IT]
 A sharp fall in shares of Franco-Belgian financial group
Dexia DEXI.BR, highly exposed to Greek loans, highlighted
concerns about the extent to which a default in Athens would
damage already fragile European banks. [ID:nL5E7L30GX]
 Canadian banks have said they have little to no exposure to
Greek debt.
 Policymakers looked no nearer to agreeing on a definitive
solution to the euro zone debt crisis. Officials meeting on
Monday are discussing ways to leverage the bloc's rescue fund
and pressure Greece to implement agreed structural reforms.
 Bond prices were higher across the curve. The two-year
Canadian government bond CA2YT=RR was up 0.5 Canadian cent to
yield 0.882 percent, while the 10-year bond CA10YT=RR gained
25 Canadian cents to yield 2.127 percent.
 (Editing by Jeffrey Hodgson)

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