September 19, 2011 / 8:39 PM / 9 years ago

CANADA FX DEBT-C$ lower as Europe fears send investors into US$

   * C$0.9897 vs US$, or $1.0104
 * Investors expect dovish tone from Carney on Tuesday
 * Bond prices stronger across the curve
 (Updates to close; adds details, analyst comment)
 By Andrea Hopkins
 TORONTO, Sept 19 (Reuters) - The Canadian dollar ended
weaker against its U.S. counterpart on Monday as investors
sought the safe-haven of the liquid U.S. dollar on fresh fears
about Europe's debt crisis.
 World stocks snapped a four-day rally, while the euro and
oil prices dropped as a new round of fear gripped markets that
Greece may default on its debt and trigger economic fallout
that would cascade throughout the euro zone and possibly
beyond. [MKTS/GLOB]
 But U.S. stocks and the euro recovered from their worst
levels in late afternoon trade after Greece's finance ministry
said the country was near an agreement with its international
lenders to continue receiving bailout funds, though some work
still needs to be done. [ID:nA8E7K200V]
 "The Canadian dollar is ending much weaker on the day, in
line with other commodity-linked friends, though it is closing
off of the lows, which is vaguely encouraging," said Camilla
Sutton, chief currency strategist at Scotia Capital.
 Sutton said the Canadian currency has been chalking up
dramatic intraday moves but staying within a relatively tight
range between C$0.9725 and C$1.0025 to the U.S. dollar as the
greenback remains broadly stronger amid the European
 But even when the Canadian currency sinks through parity
with the U.S. dollar, as it did last week, its weakness has not
been sustained, Sutton noted.
 "Parity is a bit of a magnet ... so that's what most people
are watching for," Sutton said.
 The Canadian dollar CAD=D4 ended the North American
session at C$0.9897 to the U.S. dollar, or $1.0104 U.S. cents,
down from Friday's North American session close of C$0.9790 to
the U.S. dollar, or $1.0215 U.S. cents.
 Sutton said the market is well prepared to hear a dovish
tone from Bank of Governor Mark Carney when he speaks in New
Brunswick on Tuesday, but that the bigger piece of the puzzle
remained headlines from Europe.
 Bond prices were higher across the curve as government debt
attracted safe-haven flows.
 The two-year bond CA2YT=RR was up 13.5 Canadian cents to
yield 0.947 percent, while the 10-year bond CA10YT=RR was up
93 Canadian cents to yield 2.185 percent, near multi-year lows
reached earlier this month.
 (Editing by Jeffrey Hodgson)

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