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

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CANADA FX DEBT-C$ skids to 4-month low on Europe fears May 23rd 2012, 17:14 Wed May 23, 2012 1:14pm EDT * C$ hits low of C$1.0296 vs US$, or 97.13 U.S. cents * Bonds climb across curve; 30-yr yield at record low * Currency outperforms New Zealand and Australian dollars * Retail sales edge up 0.4 pct in March 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 in tandem with the euro, global equity and commodity markets as investors worried about Greece's possible exit from the euro zone. The currency fell to C$1.0296 versus the U.S. dollar, or 97.13 U.S. cents, its weakest since Jan. 9, following the broader market trend that saw investors shun riskier assets on doubts that any new measures to tackle the euro zone debt crisis would emerge from a European leaders summit later on Wednesday. "There's concerns generally about the banking system, but once again that's primarily tied to the situation in Europe, " sa id Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. The 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. Lack of market confidence 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 Chandler. At around 1 p.m. (1700 GMT), the currency pared losses and stood at C$1.0267 versus the U.S. currency, or 97.40 U.S. cents, still significantly 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 in March 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 rise was a notch above the 0.3 percent gain forecast by market operators and followed a 0.2 percent decline in February, according to government data. Excluding autos, however, sales were up just 0.1 percent versus a market forecast for a rise of 0.5 percent rise. "The retail sales number has had a very fleeting impact," said Greg Moore, a foreign exchange strategist at TD Securities. "The focus remains on Europe for now." Canada's dollar notched a mixed performance against other G10 currencies, but outperformed some of its commodity-linked peers, reaching 2012 highs against the New Zealand and Australian dollars. Canada's two-year government bond climbed 16 Canadian cents higher to yield 1.136 percent, while the benchmark 10-year bond rose 48 Canadian cents to yield 1.859 percent. The 30-year yield touched a record low level of 2.392 percent. The Bank of Canada's auction of bonds due 2045 produced an average yield of 2.413 percent, a record low. The bid-to-cover ratio was 2.59 and reflected decent demand, said RBC's Chandler. "It had a very small tail," he said. "When you have a small tail like that there were a lot of bids close to where it got auctioned off. So good demand." Link this Share this Digg this Email Reprints

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