CANADA FX DEBT-C$ hits 7-mth low as growth fears hurt commodities

Thu Feb 21, 2013 9:53am EST

* C$ at C$1.0189 versus US$, or 98.15 U.S. cents
    * Greenback exhibits broad strength as risk appetite wanes
    * Commodity price fall hurts C$, equity markets add pressure

    By Alastair Sharp
    TORONTO, Feb 21 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, breaking through
C$1.02 to the greenback for the first time since July, as fears
about global growth hit commodity prices and related currencies.
    Worries about Europe's economic health also hurt global
stock markets, with the greenback benefiting from its status as
a safe haven and the U.S. Federal Reserve hints at an eventual
tightening of its accommodative monetary policy.
    "Equity markets are coming under pressure, commodities are
being heavily sold, and that's making its way into the currency
markets as well," said Blake Jespersen, a managing director of
foreign exchange sales at BMO Capital Markets.
    At 9:20 a.m. (1420 GMT) the Canadian dollar was
trading at C$1.0189 to the greenback, or 98.15 U.S. cents,
compared with C$1.0173, or 98.30 U.S. cents, at Wednesday's
North American close.
    "The Canadian dollar should outperform some of the majors
but against the U.S. dollar it is still a weakening story,"
Jespersen said, suggesting the pair could test C$1.03 in coming
weeks.
    The loonie, as Canada's currency is colloquially known, hit
its strongest level against the British pound since
September 2011 after the Bank of England looked set to loosen
monetary policy. It also firmed against the euro. 
    But like its Australian counterpart, which is also heavily
influenced by commodity markets, it weakened against the
greenback. Oil prices hit a three-week low and gold recovered
only slightly off 7-month lows.  
    The global appetite for riskier assets weakened on data
showing European business activity had shrunk and a
bigger-than-expected rise in weekly U.S. jobless claims.
 
    The price of a two-year Canadian government bond 
was up 3 Canadian cents to yield 1.108 percent, while the
benchmark 10-year bond rose 27 Canadian cents to
yield 1.983 percent.
    The spread between Canadian and U.S. 2-year government bond
yields was near its year-to-date low of 85 basis points on
Thursday, down from 95 basis points seen in early January.
Analysts said this has been a factor reducing the appeal of
Canadian debt for many international investors.
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A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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