CANADA FX DEBT-C$ weakens as U.S. fiscal concerns grip market

Tue Nov 27, 2012 5:33pm EST

* C$ at $0.9947 vs US$, or $1.0053
    * US Senate leader says disappointed in fiscal cliff talks
    * U.S. data comes in better than expected
    * Global lenders broker deal to cut Greek debt
    * Bond prices higher

    By Solarina Ho
    TORONTO, Nov 27 (Reuters) - The Canadian dollar 
weakened against its U.S. counterpart on Tuesday as concerns
over lack of progress in U.S. talks to avert the year-end
"fiscal cliff" left investors cautious.
    U.S. Senate Majority Leader Harry Reid said he was
disappointed that there has been "little progress" by lawmakers
to reach a deal to avoid the fiscal cliff, a convergence of an
estimated $600 billion in tax increases and spending cuts that
threatens to trigger another recession. 
    Benjamin Reitzes, senior economist and foreign exchange
strategist at BMO Capital Markets, cited market anxiety about
the U.S. budget talks and the comments by Reid for the
currency's performance. "We've stayed in a pretty tight range,
there's no reason to believe we're going to get out of that
anytime soon," he said. 
    The weakness in the Canadian dollar was not alleviated by
data that showed U.S. consumer confidence in November rose to a
4-1/2-year high even though the currency
typically responds positively to signs of growth in the economy
of its southern neighbor and biggest export market.
    One analyst said its move lower might have had to do with
repositioning after a bounce in light trading last week.
    "All the economic data that's been released this morning, at
least in the U.S. session, generally met or exceeded
expectations," said David Tulk, chief Canada macro strategist at
TD Securities, referring to the consumer confidence index, house
price data and gauges of planned business spending and
manufacturing activity. 
    "So from that perspective, I'm inclined to think of this as
more of a couple of weeks worth of moves that's being dealt with
as opposed to just a momentary reaction to the data."
     The Canadian dollar finished the North American session at
C$0.9947 to the U.S. dollar, or $1.0053, down from Monday's
North American close of C$0.9938, or $1.0062. 
     It underperformed most of its counterparts, including the
euro, the Australian and New Zealand dollars
.
     Earlier in the session, investor sentiment was boosted
after the International Monetary Fund (IMF) and Greece's euro
zone neighbors brokered a deal to cut Greek debt, and that,
along with early U.S. data, briefly boosted the Canadian
currency to C$0.9906, its strongest level since Nov. 7.
    After 12 hours of talks, global lenders agreed on a package
of measures to reduce Greek debt to 124 percent of gross
domestic product by 2020 and promised further measures to lower
it below 110 percent in 2022. 
    "Maybe it's buy the rumor, sell the facts. It's a little bit
of that today mitigating some of the positives on the back of
the better U.S. numbers," Reitzes said.
    Prices for Canadian government debt were higher, with the
two-year bond up 1.5 Canadian cents to yield 1.095
percent and the benchmark 10-year bond rising 30
Canadian cents to yield 1.728 percent.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.