CANADA FX DEBT-C$ ends week lower on Cyprus, domestic woes

Fri Mar 22, 2013 4:49pm EDT

* C$ ends session at C$1.0233 vs US$, or 97.72 U.S. cents
    * Cyprus worries weighs on currency; falls 0.4 pct for week

    By Alastair Sharp
    TORONTO, March 22 (Reuters) - The Canadian dollar firmed
slightly against its U.S. counterpart on Friday but ended the
week softer than it started as worries about a possible collapse
of Cyprus' banking system spooked investors and limited domestic
data failed to impress.
    The currency slipped 0.4 percent for the week versus the
greenback, which continues to benefit from signs of economic
recovery and its attraction for safe haven flows.
    The weakness in the loonie, as Canada's currency is
colloquially known, is expected by some to extend as fresh
domestic data paints a more detailed picture of slowing growth.
    "We have the (Canadian) dollar at C$1.05 within a couple of
months as persistently weak Canadian data continues," said
Benjamin Reitzes, a senior economist and foreign exchange
strategist at BMO Capital Markets.
    He predicted that growth and inflation data due out next
week would be barely positive and well below where the Bank of
Canada would consider raising interest rates. 
    The recent trend in Canadian economic data has been
disappointing, with historically erratic jobs numbers a rare
bright spot.
    "Improving data and outlook for the U.S. is strengthening
the U.S. dollar and weak data in Canada is weighing on the
Canadian dollar," Reitzes said.
    The Canadian dollar ended the session at C$1.0233
to the greenback, or 97.72 U.S. cents, slightly stronger than
its C$1.0243, or 97.63 U.S. cents, close on Thursday.
    Cyprus surprised investors last weekend with a plan to tax
bank deposits to secure a bailout to stave off bankruptcy, but
the tiny island's parliament later rejected it. 
    Russia rebuffed Cypriot entreaties for aid on Friday,
leaving the island's increasingly isolated leaders scrambling to
strike a bailout deal with the European Union by Monday or face
the collapse of its financial system. 
    Failure to reach a deal could weigh on a raft of assets,
including the euro and risk-related currencies such as the
loonie, and global stock markets. Gold gained one percent on the
week. 
    "The bias is going to be to sell Canadian dollar," said John
Curran, senior vice president at CanadianForex. "That was seen
yesterday down around the C$1.02 area, you get anywhere close to
the C$1.01 handle and people are going to be happy to sell
Canada."
    The loonie strengthened against the Aussie after
hitting its weakest level in more than a year on Thursday, but
was weaker against the euro and the Swiss franc
. It hit its weakest level against the British pound
 since the start of March.
    Prices for Canadian government debt were marginally lower
across the curve, with the two-year bond off 
Canadian cents to yield 0.995 percent and the benchmark 10-year
bond slipping 5 Canadian cents to yield 1.821
percent.
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