Wednesday March 19, 2008 - 21:48:48 GMT
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Reuters - www.reuters.com
Forex Market News - Canadian falls 2 pct on weak commodities
By John McCrank
TORONTO, March 19 (Reuters) - The Canadian dollar plunged 2
percent against the U.S. dollar on Wednesday as commodity
prices dropped and the focus of the market moved back to
deteriorating global economic growth.
Canadian bond prices were mixed as falling stock markets
boosted the long end, but the weaker Canadian dollar was seen
easing pressure on some sectors of the economy, and was
instrumental in lowering the short end of the curve.
The Canadian dollar closed at C$1.0152 to the U.S. dollar,
or 98.50 U.S. cents, down from 99.52 Canadian cents to the U.S.
dollar, or US$1.0048 at Tuesday's close.
U.S. crude oil prices fell 4.5 percent as investors fretted
that a global economic downturn could undermine energy demand.
Gold prices tumbled 6 percent and silver prices shed more than
7 percent in a broad-based commodities retreat.
Canada is a major exporter of many commodities, and its
currency is often influenced by moves in their prices.
"We're seeing underperformance from most of the
pro-cyclical and commodity currencies, however Canada is even
underperforming them by another percent, so it a massive
underperformance," said Camilla Sutton, currency strategist at
Recent data has shown Canada's economy is still running on
all cylinders, but most analysts expect it to slow due to its
close trading relationship with the U.S. economy, which has
been in a crisis that started in its subprime mortgage sector.
Data released on Wednesday showed Canada's wholesale trade
rose 2.6 percent in January, more than twice the amount
expected by analysts.
Canadian bond prices were mixed due to the stronger than
expected wholesale trade data, along with the weaker Canadian
dollar, which offset a flight to safety bid caused by falling
"Equities are off because commodities are off and
commodities are also having an effect on the Canadian dollar
and the Canadian dollar is having most of the influence at the
front end in terms of bond yields," said Mark Chandler, fixed
income strategist at RBC Capital Markets.
A weaker Canadian dollar would give some relief to
export-oriented areas of the Canadian economy.
The two-year bond fell 8 Canadian cents to C$102.83 to
yield 2.523 percent. The 10-year bond increased 33 Canadian
cents to C$104.36 to yield 3.441 percent.
The yield spread between the two- and 10-year bonds was
91.8 basis points, down from 100.8 points at the previous
The 30-year bond rose C$1.10 to C$118.30 to yield 3.939
percent. In the United States, the 30-year Treasury yielded
The three-month when-issued T-bill yielded 1.94 percent,
down from 2.04 percent at the previous close.
(Editing by Peter Galloway)
Reuters journalists are subject to the Reuters Editorial Handbook which requires fair presentation and
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