Monday April 27, 2009 - 20:46:50 GMT
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Reuters - www.reuters.com
Forex Market News - CANADA FX DEBT-C$ down, bonds up as swine flu worries weigh
* C$ touches low of 81.85 U.S. cents
* Bond prices higher as equities weak
* Threat of swine flu knocks equity markets
(Adds details, quote)
By Jennifer Kwan
TORONTO, April 27 (Reuters) - Canada's currency fell on
Monday as worries about the magnitude of the swine flu outbreak
pulled down the prices of Canadian commodities and pushed
investors to the perceived safe haven of the U.S. dollar.
Commodity prices and equity markets fell on concern that
the outbreak could dampen any economic rebound [MKTS/GLOB].
Mexico said on Monday that 149 people had been killed by the
virus, which has spread to the United States, Canada and Europe
"If you see people a little bit nervous over the
uncertainty, it may cause a little bit of a spillover impact in
terms of people curtailing consumption and things that would
normally be expected to help promote economic growth," said
George Davis, chief technical strategist at RBC Capital
"That uncertainty is why the equity markets are trading
with a softer tone."
The Canadian currency dropped as low as C$1.2217 to the
U.S. dollar, or 81.85 U.S. cents, but climbed a bit to finish
at C$1.2195 to the U.S. dollar, or 82.00 U.S. cents, down from
Friday's close of C$1.2097 to the U.S. dollar, or 82.67 U.S.
Oil prices, a key Canadian export, settled lower at $50.14
a barrel amid fears the flu outbreak in Mexico could hurt the
economy and air travel. [ID:nSYD459691]
"Markets remain uncertain in terms of what the eventual
impact will be," said Paul Ferley, assistant chief economist at
Royal Bank of Canada.
"How long this trend persists largely depends on more
information in terms of the spread of the swine flu, whether
there are indications of the problem deepening or not."
With no major economic data out on Monday, the currency was
largely influenced by the broader theme of risk aversion, said
Davis, as well as movements in the U.S. dollar, which typically
appreciates in times of uncertainty. [ID:nN27499283]
There are several economic releases due later this week in
both Canada and the United States. In Canada, February gross
domestic product data is due for release on Thursday.
Canadian bond prices were higher across the curve alongside
the bigger U.S. Treasury market as investors opted for more
secure assets as global stocks weakened on swine flu fears.
"With these concerns weighing on equity markets, we're
seeing funds move into fixed income markets as safe-haven
flows," Ferley said.
"It's mainly into the U.S., but there seems to be a
spillover into Canadian markets. As a result, we're seeing
yields drift lower."
The two-year Canada bond was up 3 Canadian cents at
C$100.58 to yield 0.969 percent, while the 10-year bond was
unchanged at C$106.37 to yield 3.013 percent.
The 30-year bond was up 5 Canadian cents at C$121.45 to
yield 3.757 percent. In the United States, the 30-year Treasury
yielded 3.8441 percent.
Canadian bonds largely underperformed their U.S.
counterparts across the curve. The Canadian 10-year bond yield
was 9.4 basis points above its U.S. counterpart, compared with
about 6.9 basis points on Friday.
(Additional reporting by Frank Pingue; editing by Peter
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