Wednesday April 9, 2008 - 21:09:48 GMT
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Reuters - www.reuters.com
Forex Market News - Dollar ends lower despite oil-price surge
By Frank Pingue
TORONTO (Reuters) - The Canadian dollar fell to its lowest
level in a week versus the greenback on Wednesday as potential
fallout from a deteriorating U.S. economic picture dominated
sentiment despite record high oil prices.
Canadian bond prices, with no economic data to consider,
ended higher across the curve as investors flocked to less
risky investments due to nagging U.S. recession fears.
The Canadian dollar closed at C$1.0190 to the U.S. dollar,
or 98.14 U.S. cents, down from C$1.0133 to the U.S. dollar, or
98.69 U.S. cents, at Tuesday's close.
Earlier in the session, the currency fell to C$1.0220 to
the U.S. dollar, or 97.85 U.S. cents, its lowest level since
The latest fall for the commodity-linked Canadian dollar --
it has closed lower in four straight sessions -- came despite a
rise in oil prices on Wednesday to more than $112 a barrel.
Lingering concerns about the credit market weighed on the
U.S. dollar and dragged the Canadian dollar along for the ride
since the Canadian economy relies on the United States as a
market for the bulk of its exports.
"What we've got is a weak U.S. dollar and as opposed to
that having a positive impact on Canada it actually had a
negative impact because of the fear that the U.S. slowdown is
going to spill over more definitively into Canada," said David
Watt, senior currency strategist at RBC Capital Markets.
Watt said the Canadian dollar did not rally on the higher
oil prices because the surge was not triggered by investors who
feel confident that the global economic outlook is improving, a
situation that normally would support the currency of a country
that is considered a key oil exporter.
Canadian bond prices followed the bigger U.S. Treasury
market to a higher close on concern about a prolonged and
severe economic downturn in the Unites States.
The economic concerns have put interest rates futures at
about a 40 percent chance that U.S. Federal Reserve will cut
its fed funds rate by another half percentage point at its
April 29-30 meeting.
"There's just a general malaise on Wall Street, the fear of
mounting layoffs, weak consumer spending and just a general bad
picture being reflected in Treasuries spilling over to Canadian
government bonds," said Max Clarke, economist at IDEAglobal in
New York. "So I think it's just generally CGBs moving lock step
with Treasuries on general U.S. economic weakness."
With no top-tier Canadian data due out for the remainder of
the week, the bond market's performance will most likely be
influenced by events in the United States.
The remaining Canadian data due out this week are February
trade figures on Thursday and February's new housing price
index, due out on Friday.
The two-year bond rose 16 Canadian cents to C$102.18 to
yield 2.694 percent. The 10-year bond climbed 46 Canadian cents
to C$103.43 to yield 3.556 percent.
The yield spread between the two- and 10-year bonds was
86.2 basis points, up from 84.3 basis points at the previous
The 30-year bond jumped 70 Canadian cents to C$116.1572 to
yield 4.073 percent. In the United States, the 30-year treasury
yielded 4.370 percent.
The three-month when-issued T-bill yielded 2.31 percent, up
from 2.19 percent at the previous close.
(Editing by Peter Galloway)
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