Forex Market News - Canadian dollar down as credit concerns linger
Canadian dollar down as credit concerns linger
Tue Aug 28, 2007 4:46PM EDT
By Frank Pingue
TORONTO, Aug 28 (Reuters) - The Canadian dollar closed
lower against the U.S. currency on Tuesday as concerns that
tough credit conditions could crimp global economic growth
spoiled investor appetite for risk.
Bond prices took advantage of their safe-haven status,
rising amid sharp declines in North American stock markets and
ongoing concerns over financial market turmoil.
The currency closed at C$1.0651 to the U.S. dollar, or
93.89 U.S. cents, down from C$1.0543 to the U.S. dollar, or
94.85 U.S. cents, at Monday's close.
During the overnight session the currency fell to C$1.0601
to the U.S. dollar, or 94.33 U.S. cents, but its ability to
avoid falling through a key level triggered buying interest
that ultimately boosted it to a session high of C$1.0542, or
94.86 U.S. cents.
But a sharp decline in equity markets on both sides of the
border, due mainly to nagging fears that credit turmoil could
interfere with global growth, spoiled any chance for the
currency to finish higher.
"We saw a clear turnaround in market sentiment," said
Matthew Strauss, senior currency strategist at RBC Capital
"The longer the credit concerns continue the greater the
risk that it might ultimately spill over into the real economy
and depress commodity prices from a fundamental perspective and
not just a speculative perspective."
The Canadian dollar's tumble overnight followed a speech
late on Monday by Bank of Canada Deputy Governor Pierre Duguay,
who all but reaffirmed market expectations for the central bank
to stay on the sidelines when it sets policy on Sept. 5.
Duguay said risks to the domestic economy have increased as
a result of the credit market turmoil and that the central bank
will assess the extent to which risks have shifted since its
July talk of a modest further increase to the overnight rate.
Canadian bond prices extended recent gains as they took
advantage of jitters that rattled equity markets and triggered
a rush into much safer government debt.
The next Canadian data due out is the current account
surplus, producer prices and raw materials reports on Thursday.
But all are expected to have little impact ahead of the more
influential second-quarter gross domestic product report due on
The two-year bond rose 13 Canadian cents to C$99.38 to
yield 4.116 percent, while the 10-year bond was up 24 Canadian
cents at C$97.64 to yield 4.297 percent.
The yield spread between the two-year and 10-year bond
moved to 18.1 basis points from 12.6 at the previous close.
The 30-year bond increased 42 Canadian cents to C$110.87 to
yield 4.345 percent. In the United States, the 30-year treasury
yielded 4.856 percent.
The three-month when-issued T-bill yielded 3.95 percent,
down from 3.96 at the previous close.
Reuters journalists are subject to the Reuters Editorial Handbook which requires fair presentation and disclosure of relevant interes
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