August 24, 2010 / 1:43 PM / in 10 years

CANADA FX DEBT-C$ hits 7-week low on growth fears, retail data

   * C$ falls as low as 93.81 U.S. cents
 * Canadian June retail sales disappoint
 * Bond prices jump across the curve
 By Claire Sibonney
 TORONTO, Aug 24 (Reuters) - The Canadian dollar sank on
Tuesday to a 7-week low against the greenback after domestic
retail sales data came in weaker than expected and risk
appetite faded on growing concerns about a slowing global
 Following the domestic data, the Canadian currency CAD=D4
touched a session low of C$1.0660 against the U.S. dollar, or
93.81 U.S. cents, more than a penny below Monday's finish at
C$1.0523 to the U.S. dollar, or 95.03 U.S. cents.
 Canadian retail sales grew less than expected in June as
gasoline prices slumped, partially offsetting a rebound in auto
sales, which added to mounting doubts that the Bank of Canada
will continue to raise interest rates at its recent steady
clip. [ID:nN24252766]
 Yields on overnight index swaps, which trade based on
market expectations for the central bank's Sept. 8 rate
decision, fell further after the data. BOCWATCH
 "We've had another fairly significant push over the last 24
hours or so, particularly once we got above the C$1.05 area, we
really started to see dollar/Canada take off," said Shaun
Osborne, chief currency strategist at TD Securities.
 "Generally speaking, the environment today is not
particularly good for the Canadian dollar anyway. Risk aversion
is obviously front and center for the markets."
  Commodities and U.S. stocks were also punished as
investors dumped risky assets and fled to government debt and
other safe-havens as they braced for data expected to show
further weakness in U.S. housing.
 Oil in particular was down for a fifth day, falling below
$72 a barrel, and weighing on the commodity-linked Canadian
dollar. [O/R]
 At 9:17 a.m. (1317 GMT), the Canadian currency stood at
C$1.0654 to the U.S. dollar, or 93.86 U.S. cents.
 Osborne said if the Canadian dollar pushes through a July
level of C$1.0675, that could see the currency back near
C$1.0850, to weakness last seen in May.
 Later in the day, a speech by Bank of Canada Deputy
Governor John Murray will be closely monitored for clues on the
path of future interest rates.
 With disappointing retail sales and the rate outlook
subdued, Canadian government bonds were higher across the
 Canada's two-year bond CA2YT=RR jumped 11 Canadian cents
to yield 1.196 percent, while the 10-year bond CA10YT=RR
soared 44 Canadian cents to yield 2.836 percent.
 (Reporting by Claire Sibonney; Editing by Jeffrey Hodgson)

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