January 28, 2011 / 9:38 PM / 10 years ago

CANADA FX DEBT-Egypt unrest pushes C$ below greenback parity

 * C$ ends at C$1.0011 to US$ or 99.89 U.S. cents
 * First time currency closes below parity in 1 month
 * Bond prices pick up steam across the curve
 (Recasts with market reaction to Egyptian unrest, updates to
 By Claire Sibonney
 TORONTO, Jan 28 (Reuters) - The Canadian dollar closed
below parity with the greenback for the first time in a month
on Friday as protests in Egypt sparked a flight to safety
across global markets that boosted the U.S. dollar.
 The currency CAD=D4 hit its lowest level in more than a
week, falling to C$1.0018 to the U.S. dollar, or 99.82 U.S.
cents, during the session.
 Crude oil prices surged, most stock markets sank and the
U.S. dollar rallied as images of anti-government protests and
street battles in Egypt raised concerns the unrest will
intensify and spread across the Middle East. [MKTS/GLOB]
 "The general risk appetite waned obviously with the events
in Egypt and it's changing perceptions a little bit on the U.S.
dollar," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
 While the fading risk appetite is negative for the Canadian
dollar, the gain in oil prices helped keep a cap on the
commodity currency's losses. [O/R]
 "We would have been worse off throughout all of this if oil
prices weren't up as well, but mostly people are taking a
backseat to the U.S. dollar as a result of the safe-haven bid,"
Chandler said.
 The currency CAD=D4 closed the North American session at
C$1.0011 to the U.S. dollar, or 99.89 U.S. cents, down from
Thursday's close of C$0.9932 to the U.S. dollar, or $1.0068.
The Canadian dollar was 0.6 percent lower on the week, closing
below par with the greenback for the first time since Dec. 29.
 RBC said Friday's close above C$0.9977 exposes new Canadian
dollar support levels of C$1.0031 and C$1.0208. Resistance is
now seen around C$0.9910, followed by C$0.9837.
 The currency came under some pressure early in the day
following solid U.S. economic growth data that was seen
supporting the U.S. currency more than Canada's.
 "It was a very firm report, very constructive and under
normal conditions, we would expect that bond yields for example
would be up significantly on that," Chandler said. "In fact,
bond yields are down, so it's telling you that risk aversion is
really weighing on things here."
 Looking to Monday, the market will be watching Canadian
economic growth figures for November.
 Canadian bond prices erased early losses and climbed across
the curve alongside U.S. Treasuries as the Egyptian tensions
boosted the safe-haven appeal of government debt.
 Canadian bonds outperformed their U.S. counterparts across
most of the curve.
 The two-year bond CA2YT=RR rose 9 Canadian cents to yield
1.681 percent, while the 10-year bond CA10YT=RR gained 24
Canadian cents to yield 3.247 percent.
 (Reporting by Claire Sibonney; editing by Peter Galloway)

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