November 16, 2011 / 1:28 PM / 9 years ago

CANADA FX DEBT-C$ slips on euro zone contagion fears

 * C$ at C$1.0257 vs US$, or 97.49 U.S. cents
 * Bond prices little changed
 By Claire Sibonney
 TORONTO, Nov 16 (Reuters) -  The Canadian dollar slipped
for the third day against the U.S. currency on Wednesday amid
signs that Europe's debt crisis was spreading.
 However, the currency recovered from more than a one-month
low, along with the euro, after European Central Bank buying of
Italian and Spanish debt helped stem a renewed sell-off of euro
zone government bonds. [ID:nL5E7MF410]
 "The Canadian dollar is pretty much trading off of headline
risk still, so I think markets are still in that wait-and-see
mode to see what happens with developments in Europe," said
Mazen Issa, Canada macro strategist at TD Securities.
 "There's really no clarity in terms of what will happen in
Italy and which direction spreads will go."
 The euro zone debt crisis has intensified sharply as
investors question Italy's ability to sustain its debt burden,
widely viewed as too big for other governments in the bloc to
bail out as they have the much smaller Greek, Irish and
Portuguese economies.
 A climb in yields in France, Belgium and Austria has raised
concerns those countries could come under increasing attack as
incoming governments in Italy and Greece struggle to implement
fiscal reforms.
 At 8:13 a.m. (1313 GMT), the currency  CAD=D4 was at
C$1.0257 against the U.S. dollar, or 97.49 U.S. cents, down
from Tuesday's North American session close at C$1.0208 against
the greenback, or 97.96 U.S. cents.
 "There's still a lot of risk out there, as long as the
issues in Europe are still very much prevalent, which they are,
the bias is for the Canadian dollar to weaken further," added
 Earlier, the currency fell as low as C$1.0290, or 97.18
U.S. cents, its weakest level since Oct. 12.
  Canadian government bond prices were little changed across
the curve. The two-year bond CA2YT=RR was down half a
Canadian cent to yield 0.905 percent, while the 10-year bond
CA10YT=RR eased 3 Canadian cents to yield 2.129 percent.
  (Reporting by Claire Sibonney)

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