November 23, 2011 / 2:34 PM / in 9 years

CANADA FX DEBT-C$ hits near 7-week low on Europe, China

 * Touches low of C$1.0454 vs US$, or 95.66 U.S. cents
 * Poor German bond auction, China data rattles markets
 * World stocks hit lowest in nearly 7 weeks
 * Bond prices weaken as well
 By Jennifer Kwan
 TORONTO, Nov 23 (Reuters) - The Canadian dollar sank to a
near seven-week low against the U.S. currency on Wednesday as
unrelenting fears about euro zone debt after a weak German bond
auction and soft Chinese data weighed on investor sentiment.
 World stock markets skidded as a poor sale of German
benchmark bonds ignited fears the debt crisis would engulf the
powerhouse economy. [MKTS/GLOB] [ID:nL5E7MN1M4]
 There were other worrying signs for the global growth
outlook. China's factory sector shrank at its fastest pace in
32 months on signs of domestic weakness. And the euro zone's
private sector contracted for a third month, purchasing
managers' indices showed. [ID:nL4E7MN1HM]
 The sour data pushed the Canadian currency CAD=D4 to a
low of C$1.0454 against the greenback, or 95.66 U.S. cents, its
weakest level since Oct. 6 and down from Monday's close at
C$1.0378 against the greenback, or 96.36 U.S. cents.
 "We had a bad German bond auction. If the Germans can't
even sell their own bonds it's not looking good for risk on,"
said Firas Askari, head of foreign exchange trading at BMO
Capital Markets.
 "Equities are looking to open down, everything is negative
again. The puck is back in risk-off mode. The Canadian dollar
is taking it a little bit on the chin as expected for all
perceived to be growth currencies."
 At 9:08 a.m. (1408 GMT), the Canadian currency CAD=D4
stood at C$1.0425 against the greenback, or 95.92 U.S. cents.
 Despite the weakness, the Canadian currency was
strengthening against most other major currencies. Many
analysts have predicted the Canadian dollar would outperform
against the euro and its commodity-linked peers if Europe's
debt crisis worsened. [ID:nN1E7A81FZ]
 "The key cross to look at is EURO/CAD. So what you're
seeing is the euro take it on the chin, particularly because of
the German bond," said Askari.
 He noted key technical levels to watch for included U.S.
dollar resistance at C$1.0475 and support at around C$1.0360.
 Canadian government bond prices were lower, with the
two-year bond CA2YT=RR down 4 Canadian cents to yield 0.920
percent, while the 10-year bond CA10YT=RR fell 17 Canadian
cents to yield 2.101 percent.
 (Editing by Jeffrey Hodgson)

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