Reuters: US Dollar Report: CANADA FX DEBT-Europe fears push C$ to 4-month low

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CANADA FX DEBT-Europe fears push C$ to 4-month low May 23rd 2012, 20:41 Wed May 23, 2012 4:41pm EDT * Currency ends at C$1.0242 vs US$, or 97.64 U.S. cents * C$ hits lowest since Jan. 9 at C$1.0296 vs greenback * Bonds climb across curve; 30-yr yield touches record low By Jennifer Kwan TORONTO, May 23 (Reuters) - The Canadian dollar skidded to its lowest level in more than four months against its U.S. counterpart on Wednesday, falling in tandem with the euro and global equities, as investors worried about Greece's possible exit from the euro zone. The currency fell as low as C$1.0296 versus the U.S. dollar, or 97.13 U.S. cents, its weakest since Jan. 9, as investors shunned riskier assets on doubts that any new measures to tackle the euro zone debt crisis would emerge from a European leaders summit. "There is a tremendous amount of uncertainty," said Camilla Sutton, chief currency strategist at Scotiabank. "Most of it is headline risk and the concern and the uncertainty that lies ahead, particularly as there is an escalation and debate on when, if and how Greece might leave the euro. We still think the risk is under 50 percent." European leaders are expected to discuss boosting growth at their meeting later on Wednesday and the idea of a joint euro zone bond. French President Francois Hollande supports the bond plan, but German Chancellor Angela Merkel opposes it. As well, each euro zone country will have to prepare a contingency plan for the eventuality of Greece leaving the single currency, three euro zone sources told Reuters, citing an agreement reached by officials. The lack of market confidence that the summit would yield meaningful progress sent the euro to a 21-month low. "We don't expect much by way of concrete proposals coming out," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. The currency ended at C$1.0242 versus the U.S. currency, or 97.64 U.S. cents, weaker than Tuesday's North American session finish at C$1.0218. Traders largely looked past a domestic report that showed retail sales bounced back in March. Canadian retail sales climbed after a February setback, growing 0.4 percent as consumers bought more cars and warm weather prompted them to begin their spring shopping for items such as clothing, sporting goods and garden equipment. The data had a "very fleeting impact," said Greg Moore, a foreign exchange strategist at TD Securities. " The focus remains on Europe for now," he said. LONG BOND HITS RECORD Canada's dollar notched a mixed performance against other G10 currencies, but outperformed some of its commodity-linked peers. It reached 2012 highs against the New Zealand and Australian dollars. Scotiabank's Sutton said she sees Canada's currency trading in a narrow range of C$1.0220-C$1.0320 versus the greenback into Th ursday's N orth American open. Canadian government bond prices rallied as investors sought safe haven assets. Canada's two-year bond climbed 9 Canadian cents higher to yield 1.168 percent, while the benchmark 10-year bond rose 21 Canadian cents to yield 1.888 percent. The 30-year yield touched a record low of 2.39 percent. The Bank of Canada's sale of bonds due 2045 produced an average yield of 2.413 percent, also a record low for a 30-year auction. The bid-to-cover ratio was 2.59 and reflected decent demand, said RBC's Chandler. Link this Share this Digg this Email Reprints

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