September 9, 2011 / 3:59 PM / in 9 years

CANADA FX DEBT-C$ falls to near US$ parity on ECB resignation

 *C$ hits low C$0.9974 vs US$, or $1.0026
 *Bond prices rally across curve
 *European Cental Bank member Stark to step down
 *Canada loses 5,500 net jobs in August
 *Obama lays out $447 billion jobs plan
 (Updates to midday)
 By Claire Sibonney
 TORONTO, Sept 9 (Reuters) - The Canadian dollar fell to
near parity with the U.S. dollar on Friday, touching a
one-month low, but it rallied against the euro after the
surprise resignation of a European Central Bank board member.
The Canadian currency fell as part of a selloff of risk
assets following bearish headlines on Canadian and U.S. job
woes that were amplified by news that a top German ECB official
would quit due to disagreement with the bank's policy of buying
euro zone government bonds. [ID:nL5E7K91CF]
 The latest shock from the euro zone sent the euro, global
stocks and oil prices tumbling, weighing on Canada's risk- and
commodity-related currency. Meanwhile, safe-haven flows poured
into the U.S. dollar and Treasuries. [.N] [FRX/]
 "At the moment, liquidity of the U.S. is king ... the
uncertainties on the risk side are seeing the (Canadian dollar)
lag, but it doesn't have anything like the structural negatives
that are facing the euro zone, hence the bias is that euro/CAD
will continue to go lower," said Jeremy Stretch, head of
currency strategy at CIBC in London.
He said that over the next few sessions the Canadian dollar
could climb as high as C$1.34 versus the euro, or 74.63 euro
cents, to levels last seen in July.
 "Of course, let's not completely blindside the labor market
data, but it's more of a (U.S.) dollar-based story and it's the
negativity on the broader international perspective."
 The Canadian dollar was already succumbing to the U.S.
dollar after Canadian economic data fell below expectations,
including a surprise loss of 5,500 net jobs in August. It was
also hit by fears that U.S. President Barack Obama's plan to
stimulate jobs will be held up in Congress. [ID:nN1E7880PE]
 At 11:33 a.m. (1533 GMT), the Canadian dollar CAD=D4
stood at C$0.9962 to the U.S. dollar, or $1.0038, down from
Thursday's North American session close at C$0.9880 to the U.S.
dollar, or $1.0121.
 Earlier, the currency fell as low as C$0.9974 versus the
U.S. dollar, or $1.0026, its lowest level since Aug. 9, which
marked the last time the Canadian dollar was on one-on-one
footing with the greenback.
 Stretch noted significant support just one basis point
weaker than Friday's low, which could drive the Canadian dollar
to the other side of parity at C$1.0010-20.
 He expected that such a move would be short-lived, however,
saying that the currency's underlying dynamics are still
relatively encouraging.
 Canadian bond prices cut earlier losses to rally alongside
U.S. Treasuries. [US/].
 The two-year bond CA2YT=RR was up 12 Canadian cents to
yield 0.819 percent, while the 10-year bond CA10YT=RR gained
56 Canadian cents to yield 2.155 percent.
 (Editing by Peter Galloway)

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