Monday October 26, 2009 - 20:17:39 GMT
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Reuters - www.reuters.com
Forex Market News - CANADA FX DEBT-C$ nears 3-week low as commodities, stocks fall
* C$ eases more than 1 cent to C$1.0698 to the U.S. dollar
* Stock reversal, commodity drop drive currency lower
* Canadian bonds mostly weaker, but outperform U.S.
By Frank Pingue and Jeffrey Hodgson
TORONTO, Oct 26 (Reuters) - The Canadian dollar fell to its
lowest level in nearly three weeks on Monday, as a drop in
commodity prices and retreating global stocks added to losses
triggered by recent central bank comments on the currency.
North America stocks had initially opened higher, but
reversed direction as commodity prices fell and risk aversion
increased [.N][.TO], prompting investors to look to the safety
of the U.S. dollar.
"The whole world got very unsafe very quickly this
morning," said Steve Butler, director of foreign exchange
trading at Scotia Capital.
"Stock markets turned around very dramatically and in the
same breath the U.S. dollar turned around very dramatically and
so we've seen a big shoot-up in the U.S. dollar and it's hurt
almost every currency ... Canada was no exception."
The Canadian dollar often trades based on the risk appetite
of global investors and prospects for the country's commodity
Oil fell more than 2 percent to below $79 a barrel on
concerns that a sluggish economic recovery will keep global
demand low. Gold also hit a 10-day trough. [O/R] [GOL/]
At mid-afternoon, the Canadian dollar fell to C$1.0698 to
the U.S. dollar, or 93.48 U.S. cents, its lowest since Oct. 6,
and down from C$1.0519 to the U.S. dollar, or 95.07 U.S. cents,
at Friday's close.
The currency had already taken a hit last week after the
Bank of Canada and Governor Mark Carney warned that a rally
toward parity with the greenback was a risk to growth and
mentioned the possibility of intervention. [ID:nN22502163]
"Obviously, Carney's comments and the Bank of Canada
statement have taken a little bit of wind out of the sail of
the Canadian dollar near term," said Firas Askari, head of
foreign exchange trading at BMO Capital Markets.
Carney echoed the comments in a speech in Montreal on
Monday, repeating the central bank's view that the current
strength in the Canadian dollar would more than fully offset
favorable economic developments since July. [ID:nBAC002343]
Canadian government bond prices, with no domestic data to
consider until later this week, were mostly weaker, mirroring
losses in U.S. Treasury bonds, which investors sold ahead of a
record round of new debt auctions. [US/]
The two-year Canadian government bond CA2YT=RR fell 1
Canadian cent to C$99.42 to yield 1.533 percent, while the
10-year bond CA10YT=RR fell 30 Canadian cents to C$101.65 to
yield 3.545 percent.
Canadian bonds mostly outperformed U.S. issues, with the
10-year yield 3 basis points below its U.S. counterpart,
compared with 2 basis points above on Friday.
(Editing by Rob Wilson)
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