Reuters: US Dollar Report: CANADA FX DEBT-C$ weakens to 2-1/2 month low, Sandy hits volumes

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CANADA FX DEBT-C$ weakens to 2-1/2 month low, Sandy hits volumes Oct 29th 2012, 21:12 Mon Oct 29, 2012 5:12pm EDT * C$ ends at C$1.0008 vs US$, or $99.92 U.S. cents * First time below US$ parity since August * Approaching hurricane kept volumes light * Bond prices rally across the curve By Claire Sibonney TORONTO, Oct 29 (Reuters) - Canada's dollar weakened below parity with the greenback for the first time since August on Monday, hurt by worries about global economic growth and falling oil prices as the massive storm set to pummel the U.S. East Coast kept trading volumes light. Hurricane Sandy, one of the biggest storms ever to hit the United States, forced New York and other cities to close public transport systems and schools and order mass evacuations. The storm closed Wall Street on the anniversary of the 1929 stock market crash, with all U.S. stock markets shut in the first weather-related closure in 27 years. They were expected to remain closed on Tuesday. "With some of the U.S. markets away, it really does cut into liquidity, so it's been a quiet day even though (U.S.) dollar/Canada has traded through parity," said Camilla Sutton, chief currency strategist at Scotia Capital. Brent and U.S. crude futures retreated as the shutdown of two-thirds of the U.S. East Coast refining sector ahead of Hurricane Sandy put pressure on oil prices. Weaker commodity prices have added to a host of negative factors causing the Canadian dollar to lag over the past couple weeks. Other factors have included less hawkish talk from the Bank of Canada and the federal government's surprise decision to block the takeover of Canada's Progress Energy by Malaysia's Petronas. "There's been a tremendous focus on the M&A side of Canada," Sutton said, referring to the failed Petronas deal and questions about how receptive the country may be to foreign capital in the future. The currency also took a hit after Moody's said on Friday it was reviewing five top Canadian banks for possible rating downgrades due to concerns about a softening economy and volatile capital markets. Meanwhile, the U.S. dollar was broadly stronger on Monday, hurt by uncertainty over whether Greece would be able to agree to a euro zone deal on austerity, and with no sign of when, or if, Spain might request European aid. The Canadian dollar ended the North American session at C$1.0008 to the greenback, or $99.92 U.S. cents, compared with C$0.9980, or $1.0020, at Friday's close. The currency's low for the day was C$1.0010, or 99.90 U.S. cents, its weakest level since Aug. 7. "We should see some decent buying interest above parity, but this is just on the back of a more general (U.S.) dollar move," said Elsa Lignos, a London-based currency strategist at Royal Bank of Canada. Scotiabank's Sutton said that after the Canadian dollar broke through significant technical support around parity, the next near-term level to watch is the Aug. 2 low of C$1.0085, or 99.16 U.S. cents. Volumes in the foreign exchange market were very light. Canadian government debt prices outperformed U.S. Treasuries across the curve. U.S. bond markets closed at noon eastern (1600 GMT) due to the storm. Canada's two-year bond rose 7 Canadian cents to yield 1.086 percent, and the benchmark 10-year bond gained 42 Canadian cents to yield 1.793 percent. Link this Share this Digg this Email Reprints

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