* C$ slips to C$0.9632 to U.S. dollar, or $1.0382
* Canadian bonds mostly higher
By Solarina Ho
TORONTO, July 5 The Canadian dollar slipped for
a second session against the U.S. dollar on Tuesday after a
major ratings agency downgraded Portugal and as soft euro zone
data and worries about China left investors cautious.
Moody's Investors Service cut Portugal's credit rating by
four levels into junk territory, saying there was great risk
the country would need a second round of financing before it
could return to capital markets. The news added to lingering
worries about Greece even as Athens narrowly averted a
Adding to the bad news from Europe, growth in the euro
zone's dominant services sector slowed to its weakest pace
since October, while euro zone retail sales data was also below
Media reports about a possible rate rise in China and a
Moody's report saying the scale of problem loans at local
governments in the country may be much bigger than previously
thought further spoiled risk appetite. [nL3E7I507Y]
"A slight risk aversion helped the U.S. dollar, that's why
we're down vs. the U.S. dollar," said Mark Chandler, head of
Canadian fixed income and currency strategy at RBC Capital
Markets. "It's not a strong risk-on or risk-off theme -- not
as strong as what we've seen over the last month."
The currency CAD=D4 finished at C$0.9632 to the U.S.
dollar, or $1.0382, down from Monday's North American session
close of C$0.9608 versus the U.S. dollar, or $1.0408. The
currency strengthened to as high as C$0.9594 against the U.S.
dollar earlier in the day.
Looking ahead, the Canadian dollar is expected by some
analysts to find support in the C$0.9675-C$0.9700 range.
"Unless things deteriorate rapidly in Europe or in the
equity space in the next couple of days, I think for this week
we'll probably struggle to get much above C$0.97," said Shaun
Osborne, chief currency strategist at TD Securities.
Employment data on both sides of the border at the end of
this week will also be in focus. ECONCA
"We're going to need quite a surprise to get the market
moving ... data surprises will become a little bit more
important," said Chandler.
Canadian bond prices were mostly higher, mirroring some of
the moves by their U.S. Treasury counterparts as the safe-haven
appeal of government bonds ended a sell-off [US/].
The two-year bond CA2YT=RR was up 3 Canadian cents to
yield 1.566 percent, while the 10-year bond CA10YT=RR was up
15 Canadian cents to yield 3.070 percent.
(Additional reporting by Claire Sibonney; Editing by Jeffrey