CANADA FX DEBT-C$ at 3-month low on fear over Europe, U.S. economies

Fri Nov 9, 2012 9:29am EST

* C$ falls to C$1.0015 vs US$ or 99.85 U.S. cents
    * Earlier hit C$1.0034 vs US$, its lowest since Aug. 3
    * Bond prices climb across the curve

    By Claire Sibonney
    TORONTO, Nov 9 (Reuters) - The Canadian dollar slumped to a
more than three-month low against its U.S. counterpart on
Friday, tracking a slide in equity and commodity markets, as the
euro zone crisis was seen extending its reach to France and
Germany, and investors worried about a looming U.S. "fiscal
cliff."
    Growth in Germany, Europe's largest economy, is likely to
weaken in the next two quarters as firms postpone investments
while France's central bank said it expected the euro zone's
second-largest economy to slip into recession as 2012 ends.
  
    Investors were wary, too, before a Greek parliament vote on
Sunday on its 2013 budget. The budget must be passed to unlock a
further tranche of international aid. 
    Meanwhile, in a speech at 1:05 p.m. EST (1805 GMT), newly
reelected U.S. President Barack Obama is likely to discuss
looming tax hikes and government spending cuts - the so-called
fiscal cliff - that would go into effect by the end of the year,
possibly driving the U.S. economy into recession unless Congress
acts to prevent them.
    "We have an overarching theme of U.S. dollar strength, we
have oil prices having dropped into the low $84s and equity
markets that are very weak," said Camilla Sutton, chief currency
strategist at Scotiabank.
    Still, Sutton said the Canadian dollar was outperforming
other major currencies.
    "For Canada, it's more a story of there hasn't been any
specific domestic news that has hurt us."
    Even better-than-expected Chinese economic data for October,
which pointed to a modest rebound in the world's second largest
economy, failed to stem a selloff in riskier assets.
    At 9:10 a.m., the Canadian dollar stood at C$1.0015
versus the U.S. dollar, or 99.85 U.S. cents, softer than
Thursday's North American session close at C$1.0004 to the U.S.
dollar, or $0.9996.
    Earlier, the currency slipped to C$1.0034, or 99.66 U.S.
cents, its weakest level since Aug. 3.
    Sutton said C$1.0040 was the next significant level of
resistance for the U.S. dollar versus Canada's.
    The price of Canadian government debt rose across the curve.
The two-year government of Canada bond was up 3
Canadian cents to yield 1.059 percent, while the benchmark
10-year bond added 25 Canadian cents to yield 1.685
percent.
FILED UNDER: