CANADA FX DEBT-C$ rally stalls with Greek debt talks

Mon Feb 6, 2012 4:49pm EST

* C$ at C$0.9955 to the US$, or $1.0045

* Greek debt worries weigh on market

* Bond prices mostly higher

By Jon Cook

TORONTO, Feb 6 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday, pulling back from a 3-month high hit Friday, as Greek debt worries mounted after ongoing talks with European policymakers to avoid a messy default missed another deadline.

A European Commission spokesman said Greece had already gone beyond the deadline for finalising talks on the second financing package from the euro zone and the International Monetary Fund, and Athens needed urgently to take decisions.

"Canada did weaken off along with most of the other currencies against the (U.S.) overnight, but the North American session has been absolutely sideways," said Shane Enright, executive director of foreign exchange sales at CIBC World Markets.

Enright added that with last week's disappointing Canadian GDP and jobs numbers there was little domestic news that supported increased buying of the Canadian dollar and it would likely take a Greek debt deal to move the currency higher.

"If we're going to move this week in a major way it's going to have to be news out of Europe that drives us," he said.

Greece's coalition members must agree to painful terms of a new bailout worth 130 billion euros ($170.6 billion) before euro zone finance ministers next meet. Failure to reach a deal would leave the prospect of an unmanaged Greek debt default when bond repayments fall due in March.

The Canadian dollar finished at C$0.9955 to the U.S., or $1.0045, down slightly from Friday's finish at C$0.9936 against the greenback, or $1.0064.

On Friday, Canada's currency surged to C$0.9928, its strongest level since Oct. 31, after data showed the American economy added 243,000 jobs, the most since last April.

The currency firmed early on Monday, but slumped after the latest setback by Greece sent the euro sliding, triggering stop-loss orders.

"The longer we wait and the closer we get to the next deadline the more difficult things become," said Steve Butler, director of foreign exchange trading at Scotia Capital.

In the near term, Butler saw the Canadian dollar hovering between its 200-day moving average at about C$0.9960 and C$1.0040.

Canadian bond prices were mostly higher, with the two-year bond up 3 Canadian cents to yield 1.023 percent. The 10-year bond rose 37 Canadian cents to yield 1.972 percent.

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