Wednesday October 1, 2008 - 00:11:12 GMT
Share This Story
Reuters - www.reuters.com
Forex Market News - Canada dollar in its steepest decline in 6 months
*Canadian dollar dives 1.9 percent against greenback
*Energy production powers Canada GDP higher in July
*Longer-dated bonds have some of their biggest losses ever
TORONTO, Sept 30 (Reuters) - The Canadian dollar staged its
biggest single-day drop against the U.S. dollar in more than
six months on Tuesday as new-found hope for a $700 billion U.S.
financial bailout plan sent the greenback higher across the
Canadian bond prices fell victim to a massive unwinding of
the previous session's safe-haven bid, with some of the biggest
one-day declines ever for longer-dated bonds.
The Canadian dollar ended the North American session at
C$1.0642 to the U.S. dollar, or 93.97 U.S. cents, down from
C$1.0439, or 95.79 U.S. cents, at Monday's close.
The currency fell 1.9 percent, its biggest one-day decline
since March 19. The losses added to the 1.1 percent slide from
Monday, erasing gains made earlier in the month and leading to
a loss of 0.2 percent in September.
"The magnitude of the moves are staggering," said Matthew
Strauss, senior currency strategist at RBC Capital markets. "If
you look at the equity markets, the commodity markets -- I
mean, gold -- it's moved more than $40 dollars on the day. It's
North American equity markets surged higher, erasing a good
chunk of the previous day's record losses, as investors bet
Washington would eventually pass a plan to stabilize the U.S.
"It looks like the financial bailout package might get
passed by the end of the week, so there tends to be a a bit of
feel-good factor about that," said David Bradley, managing
director of foreign exchange at Scotia Capital.
He said forex traders moved to buy U.S. dollars in a
safe-haven bid with the European financial sector now starting
to show the kind of problems that U.S. banks and insurers have
faced for months.
Analysts said illiquid markets and month-end flows may have
With all the volatility in the markets, investors ignored
news that the Canadian economy grew more than expected in July,
up 0.7 percent, compared with the 0.2 percent consensus
expectation. See [ID:nN30397290] The Canadian dollar did not
move on the news, nor did the bond market.
Longer-dated Canadian bond prices had some of their biggest
declines ever as Monday's safe-haven bid crumbled on new-found
optimism about the stability of the world financial system, and
investors moved their cash to the riskier, but more lucrative,
"The pressure is coming from the equity markets recovering
and the idea that they're going to push ahead with a pretty
substantive package and the idea that maybe the compromises
will yield even more in terms of impact on the direct economy,"
said Mark Chandler, fixed income strategist at RBC Capital
But he warned that with the ongoing decline in U.S. house
prices, the American economy is far from sound, with or without
a bailout package.
"All that we see reflected in bond markets today may end up
being a bit premature," he said.
The two-year bond fell 54 Canadian cents to C$99.91 to
yield 2.795 percent. The 10-year bond plunged C$2.12 to
C$103.93 to yield 3.760 percent.
The yield spread between the two-year and the 10-year bond
was 97.3 basis points, down from 113 basis points at the
The 30-year bond recorded its biggest fall ever, tumbling
C$3.92 to C$112.58 for a yield of 4.237 percent. Longer-dated
bonds are more sensitive to shorter-dated bonds to volatility
in equities markets. In the United States, the 30-year Treasury
yielded 4.311 percent.
The three-month when-issued T-bill yielded 2.00 percent, up
from 1.75 percent at the previous close.
(Reporting by John McCrank; Editing by Frank McGurty)
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."