Reuters: US Dollar Report: CANADA FX DEBT-C$ weakens as stocks slip, Aussie outlook darkens

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CANADA FX DEBT-C$ weakens as stocks slip, Aussie outlook darkens Oct 2nd 2012, 20:52 Tue Oct 2, 2012 4:52pm EDT * C$ weakens to close at C$0.9843, or $1.0160 * Australia rate cut spurs caution, but leads to gains vs A$ * Spain PM says bailout not imminent, limits risk appetite * Traders await employment data, central bank decisions By Alastair Sharp TORONTO, Oct 2 (Reuters) - The Canadian dollar closed lower against the U.S. currency on Tuesday after Spain's prime minister said a request for a debt bailout for his country is not imminent and as investors expressed fear about third-quarter earnings. The more cautious tone that weighed on the Canadian currency was deepened by an earlier-than-anticipated interest rate cut by the Reserve Bank of Australia (RBA), which the bank justified in part by pointing to a darker global economic background. "One of the things that is causing the Canadian dollar to weaken is a little bit of weakness in equity markets, but also the RBA surprised by cutting rates, which adds an element of uncertainty over the economic outlook," said HSBC chief economist David Watt in Toronto. Canadian and U.S. stocks were mixed as investors retreated from stocks closely tied to the pace of growth and digested the statement by Spain's prime minister that a request for European aid was not imminent. A request for a bailout is viewed as positive for financial markets because it would trigger Spanish bond buying by the European Central Bank, which would lower the country's borrowing costs. Traders were also looking ahead to key North American employment data due on Friday. "There's a lot of stuff ahead and not much today, so people will probably sit on their hands for now," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. The Canadian dollar closed at C$0.9843, or $1.0160, weaker than its close of C$0.9827, or $1.0176, on Monday. Reitzes said the Canadian dollar would find support around C$0.9874 and the Sept. 5 session low of C$0.9920. He saw resistance at last week's high of C$0.9781. The Canadian dollar firmed against Australia's currency after the central bank of the fellow resource-rich economy cut interest rates to a three-year low and left the door ajar for more easing. It climbed as high as C$1.0083 to the Australian dollar, or 99.17 Australian cents, its strongest level since Sept. 11. DATA, CENTRAL BANKS AHEAD Both Canada and the United States release September employment figures on Friday, while the European and Japanese central banks both make interest rate decisions this week. On Wednesday, payrolls processor ADP issues its U.S. jobs data, and the Institute for Supply Management publishes data about non-manufacturing sectors of the U.S. economy. The European Central Bank will decide on Thursday whether to hold rates or cut them to offer further support for stumbling euro zone countries. The Bank of Japan is expected to keep monetary settings unchanged on Friday even as weakening Asian manufacturing activity clouds the outlook. The bank is seen preferring to spend some time reviewing the effects of its policy loosening last month. Canadian government bond prices were mixed, with the two-year bond little changed to yield 1.061 percent, while the benchmark 10-year bond slipped 7 Canadian cents, yielding 1.722 percent. Link this Share this Digg this Email Reprints

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