November 23, 2011 / 9:40 PM / 9 years ago

CANADA FX DEBT-C$ slides to 7-week low on Europe worries

   * Ends at C$1.0485 to the US$, or 95.37 U.S. cents
 * Touches low of C$1.0497, weakest since Oct. 5
 * Poor German bond auction, China data rattles markets
 * Bond prices climb across curve
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Nov 23 (Reuters) - The Canadian dollar skidded to
a seven-week low against the U.S. currency on Wednesday as a
weak German bond auction and soft economic data added to
unrelenting investor anxiety about the euro zone debt crisis.
 The euro fell to its lowest point since early October after
Germany suffered one of its least successful debt auctions
since the single currency was launched, while world stocks
skidded on fears the debt crisis would engulf Europe's
powerhouse economy. [FRX/]
 The bond auction, described as "disastrous" and "horrible"
by market observers, was a dangerous signal of investor
frustration over the lack of new policy measures to halt the
bloc's debt crisis. [MKTS/GLOB]
 Indeed, Bank of Canada Mark Carney warned of Europe's
"barely contained" financial crisis and said authorities there
needed to provide more details on how to resolve the troubles.
 "Europe is still the key for pretty much everybody," said
Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO Capital Markets.
 "(Carney) mentioned Europe, the situation there, is 'barely
contained' - far from encouraging words from the governor of
the Bank of Canada. He said they essentially need to get their
act together soon otherwise, and he didn't say this, but we'll
all pay the price."
 The Canadian currency CAD=D4 finished the session at
C$1.0485 against the greenback, or 95.37 U.S. cents, down
nearly a penny from C$1.0378, or 96.36 U.S. cents, at Tuesday's
 Weak manufacturing data from both China and Europe also
helped to push the Canadian dollar lower, sending the greenback
higher ahead of the U.S. Thanksgiving holiday on Thursday.
 "The U.S. dollar is going to outperform. Euro is overvalued
where it is, which is going to drag dollar/Canada higher. We're
looking for levels at around C$1.0650," said David Bradley,
director of foreign exchange trading at Scotia Capital.
 Earlier on Wednesday, the Canadian dollar weakened to
C$1.0497 to the U.S. dollar, or 95.27 U.S. cents.
 Still, despite the weakness, the Canadian currency
strengthened against most other major currencies. Many analysts
have predicted it will outperform against the euro and its
commodity-linked peers if Europe's debt crisis worsened.
 Canadian government bond prices were higher, following the
trend in the U.S. where Treasury debt prices rose as euro zone
woes underpinned the safe-haven appeal of government debt.
 The two-year bond CA2YT=RR ticked 1 Canadian cent higher
to yield 0.897 percent and the 10-year bond CA10YT=RR rose 38
Canadian cents to yield 2.041 percent.
 "Stocks are down, yields are lower, bonds are bid. It's a
flight to safety," said Reitzes.
 (Editing by Rob Wilson)

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