CANADA FX DEBT-Canadian dollar softens on growth concerns

Wed Jan 16, 2013 4:35pm EST

* C$ down at C$0.9861 vs US$, or $1.0141
    * Bond prices extend gains across curve

    By Claire Sibonney
    TORONTO, Jan 16 (Reuters) - The Canadian dollar drifted
lower against the U.S. dollar on Wednesday as poor global
economic data rekindled fears about the health of the world
economy.
    A slow economic recovery in developed nations is holding
back the global economy, the World Bank said, as it sharply cut
its outlook for world growth in 2013. 
    Meanwhile, the economic outlook for the euro zone darkened
as data showed new-car sales in December had plunged to their
the lowest since 1995, with top producers like Volkswagen
suffering heavy falls. 
    The news comes a day after Germany said its economy shrank
at its fastest pace in almost three years in the final quarter
of 2012.
    "I don't know if it's a Canadian dollar story at these
levels currently. I think it's kind of taking its cues from
risk-on and risk-off and (U.S.) dollar-based moves more than
anything," said Darcy Browne, managing director of capital
markets trading at CIBC.
    The Canadian dollar ended the North American
session at C$0.9861 versus the greenback, or $1.0141, weaker
than Tuesday's close at C$0.9841, or $1.0162.
    "There still continues to be really good (U.S. dollar)
selling around the C$0.9875-85 level which is currently capping
the range and has been for the last week," added Browne. "The
dips are being bought at the lower end of the range,
C$0.9825-30."
    The currency trimmed some of its earlier losses as U.S.
stock markets advanced on strong financial results. 
    The Canadian dollar was weaker on the crosses, falling
against the yen with the U.S. dollar for a second
straight session after a recent warning from a Japanese official
about excessive yen weakness continued to underpin the currency.
    The Canadian dollar was also slightly softer versus the euro
 on persistent concerns about the region's economy.
    The currency has been trading within the C$0.98 to parity
range against the greenback over the last couple months.
    John Curran, senior vice president at CanadianForex, noted
that rangebound trading was seen in other commodity currencies
such as the Australian and New Zealand dollars as well.
    "People are comfortable with their levels against the U.S.
dollar for those (commodity) currencies," he said. "There's
still a bit of a premium attached to all of them."
    Curran noted near-term Canadian dollar support around
C$0.9880. Breaching that level would open up further weakness
toward C$0.9920.
    Canadian bond prices picked up across the curve, following
U.S. Treasuries up as traders extended the previous day's gains
on mounting concerns about a looming political battle in
Washington to raise the government's debt limit. 
    Canada's two-year bond rose 3 Canadian cents to
yield 1.169 percent, while the benchmark 10-year bond
 added 15 Canadian cents to yield 1.892 percent.
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