January 22, 2010 / 9:36 PM / 10 years ago

CANADA FX DEBT-C$ hits 2010 low as investors sell risky assets

 * Ends lower at C$1.0581 to US$, or 94.51 U.S. cents
 * Down 2.7 percent for the week
 * Touches 2010 low of C$1.0603, or 94.31 U.S. cents
 * Bond prices flat to a slightly higher across curve
 (Updates to close, adds quote)
 By Jennifer Kwan
 TORONTO, Jan 22 (Reuters) - The Canadian dollar hit its
lowest level this year on Friday as investor confidence was
shaken by concerns over a White House plan to limit risk-taking
by U.S. banks and China's monetary policy stance.
 The currency touched a session low of C$1.0603 to the U.S.
dollar, or 94.31 U.S. cents -- its lowest level since late
December -- further beaten down after data showed retail sales
for November fell more than market expectations, which sparked
concern about the strength of consumer demand. [ID:nN22227089]
 There is a "risk-off tone" in the market, said Millan
Mulraine, an economics strategist at TD Securities.
 "Canada has certainly been caught up in that whirlwind," he
said. "That could continue to be the case over the next little
while as investors take some risk off the table as they assess
the unfolding economic recovery."
 The Canadian dollar finished at C$1.0581 to the U.S.
dollar, or 94.51 U.S. cents, down from Thursday's finish at
C$1.0514 to the U.S. dollar, or 95.11 U.S. cents. The currency
dropped 2.7 percent for the week, its steepest weekly loss
since late October.
 The Canadian dollar's fall has been pegged to key events
such as U.S. President Barack Obama's proposal to put stricter
limits on financial institutions' risk-taking. [MKTS/GLOB] [.N]
 As well, investors have been nervous over possible monetary
tightening in China, which has raised worries about commodity
prices and the global economic recovery.
 "There has certainly has been some concern on part of the
financial market that as China begins their monetary policy
tightening it will slow global growth, and certainly global
demand," said Mulraine.
 "If China starts deliberately slowing down its economic
growth than it will certainly have a negative spillover effect
on other economies that have benefited from the surge of
economic activity in Asia and China. This is all part of the
risk-off assessment."
 As well, the euro has been under steady pressure this year
as investors have worried about Greece's ability to rein in its
deficit. [FRX/]
 In Canada, domestic data on Friday showed retail sales for
November fell by 0.3 percent from October, pushed down in part
by unseasonably warm weather, which cut demand for winter
clothing and shoes. Market analysts polled by Reuters had
predicted a 0.2 percent fall. [ID:nN22227089]
 "The numbers were weaker than expected across the board,"
said George Davis, chief technical strategist at RBC Capital
 "We're seeing a little bit of faltering on the part of the
consumer. That's becoming a little bit of concern."
 The price of oil, a key Canadian export, slipped to below
$75 a barrel, while gold prices were also softer. Both
commodities exert a strong influence on the Canadian dollar.
[O/R] [GOL/]
 Government bond prices were flat to slightly higher as
investors took a pause after a rally in prices in the previous
 "Right now, bond investors are more or less sitting on
their hands hoping to see where things are heading," said TD's
 The two-year bond CA2YT=RR was largely unchanged, up 2
just Canadian cents at C$100.14 to yield 1.173 percent, while
the 30-year bond CA30YT=RR edged 15 Canadian cents higher to
C$116.70 to yield 3.991 percent.
 Canadian bonds mostly outperformed U.S. notes across the
curve. The Canadian 30-year bond was 53 basis points below the
U.S. 30-year yield, compared with about 50 basis points in the
previous session.
 (Editing by Rob Wilson)

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