By Frank Pingue
TORONTO, Nov 9 (Reuters) - The Canadian dollar fell against
the U.S. currency for a third straight session on Friday, its
latest drop coming after weak domestic trade surplus data.
Domestic bond prices finished higher as further declines in
North American equities helped extend the parade into more
secure assets like government debt.
The Canadian dollar closed at US$1.0606, valuing each U.S.
dollar at 94.28 U.S. cents, down from Thursday's close of
US$1.0683, or 93.60 Canadian cents.
It marked the third consecutive decline for the Canadian
dollar after hitting a high of US$1.1039 on Wednesday, which
marked its highest level since the 19th century.
Friday's drop in the currency followed economic data that
showed Canada's monthly trade surplus shrank to its lowest
level in nearly nine years in September.
The data added credence to the idea that a strong Canadian
dollar and a weakening U.S. economy will hurt economic growth
in the months to come and prompt a Bank of Canada rate cut.
"Reality is seeping in and we are pulling back into more
realistic levels," said Carlos Leitao, chief economist at
Laurentian Bank of Canada in Montreal.
"The reality is the shrinking Canadian trade surplus, which
was confirmed today, and simply the fact that the previous move
to US$1.10 was clearly way overdone."
The Bank of Canada, which has left its key overnight rate
steady since a quarter-point hike in July to 4.50 percent, will
next set policy on Dec. 4.
A rise in oil prices above $96 a barrel helped cushion the
currency's slide. Canada is both a key producer and exporter of
oil and the Canadian dollar often follows oil prices.
The retreat by the currency did not trigger any big
concerns in the marketplace as many experts have been calling
it overvalued as it blasted above parity.
Bond prices rallied along with the larger U.S. market as a
race out of equities benefited bonds while investors sought the
safety of government debt amid warnings of losses at financial
North American stock markets tumbled on Friday, with the
Toronto Stock Exchange closing 258 points lower and the Dow
Jones industrial average ending down 223 points.
The fall in equity markets was sparked in part by worries
over more U.S. credit losses.
The two-year bond rose 9 Canadian cents to C$100.65 to
yield 3.915 percent, while the 10-year bond climbed 41 Canadian
cent to C$98.36 to yield 4.210 percent.
The yield spread between the two-year and 10-year bond
moved to 29.5 basis points from 31.2 at the previous close.
The 30-year bond added 74 Canadian cents to C$111.29 to
yield 4.319 percent. In the United States, the 30-year treasury
yielded 4.593 percent.
The three-month when-issued T-bill yielded 3.99 percent,
down from 4.03 percent at the previous close.
(Editing by Rob Wilson)