CANADA FX DEBT-C$ weakens as Bernanke warns on fiscal cliff
* C$ at C$0.9973 to the U.S. dollar, or $1.0027 * Risk appetite curbed by Bernanke warning on fiscal cliff * C$ supported by optimism Greece will receive aid funding * Canadian wholesale trade unexpectedly falls in Sept By Alastair Sharp and Solarina Ho TORONTO, Nov 20 (Reuters) - The Canadian dollar weakened a gainst the U.S. dollar on Tuesday as U.S. Federal Reserve Chairman Ben Bernanke warned again that economic recovery could be derailed if the United States falls over its "fiscal cliff" of higher taxes and lower government spending. The fate of the Canadian dollar is closely tied to the U.S. economy, Canada's largest export market, and Bernanke said the U.S. central bank does not have the tools to offset the damage the fiscal cliff could do if a compromise is not found to avoid it. He was also cautious about the strength of the U.S. housing market recovery. "We've had good housing data of late and he's still quite cautionary on that front," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada. Chandler added that "there may have been some misplaced hope" Bernanke would detail the steps the Fed would take after its Operation Twist stimulus program ends in December. Bernanke said 2013 could be a "very good year" for the U.S. economy if politicians can strike a quick deal to avoid the so-called fiscal cliff of expiring tax cuts and government spending reductions that could lead to recession. The Canadian dollar ended trade at C$0.9973 to the U.S. dollar, or $1.0027, compared with Monday's North American finish of C$0.9966, or $1.0034. The currency had been steady for much of the morning session, supported by cautious optimism that debt-ridden Greece was on track to receive aid funding. Hopes for Greek aid offset Moody's downgrade late on Monday of France's prized triple-A credit rating. The ratings agency cited an uncertain fiscal outlook and deteriorating economy for the cut. Euro-zone finance ministers were meeting on Tuesday to discuss unlocking delayed aid payments to Greece, a day after Athens passed laws to enforce budget targets to appease foreign lenders. "The bigger news will be if they don't get their money. You'll see a much stronger market reaction than if they do get their money because the market's probably operating on the assumption that they will," said Matt Perrier, director of foreign exchange sales at BMO Capital Markets. The Canadian dollar's performance was mixed against other major currencies, outperforming commodities-linked counterparts such as the Australian dollar, but underperforming the euro and British pound. The currency showed little reaction to Canadian wholesale trade data, which showed an unexpected fall of 1.4 percent in September from August. TRADERS EYE IMF REPORT Currency analysts said a more encouraging development for the Canadian dollar was a discussion by the International Monetary Fund on having big currency holders such as central banks disclose more details on their holdings of Canadian and Australian dollars. A public information notice last week by the IMF executive board supported an August report recommending the IMF's Currency Composition of Foreign Exchange Reserves data be expanded to separately identify holdings of the two commodity-linked currencies. "This has to be seen as a rather strong endorsement for both currencies," analyst Dennis Gartman wrote in his daily Gartman letter. Canada's economy recovered more strongly from the 2008 financial crisis than its Group of Seven peers and it remains one of the few developed countries to retain an undisputed triple-A credit rating. Prices for Canadian government debt were lower across the curve, with the two-year bond down 3 Canadian cents to yield 1.112 percent, and the benchmark 10-year bond slipping 20 cents to yield 1.759 percent.
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