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CANADA FX DEBT-C$ falls with commodities as risk appetite wanes

Published 11/20/2009, 05:15 PM
Updated 11/20/2009, 05:18 PM

* C$ falls to C$1.0699 to U.S. dollar

* Currency down 1.8 pct for the week

* Sluggish oil, equity prices weigh (Updates to close, adds quotes)

TORONTO, Nov 20 (Reuters) - The Canadian dollar fell on Friday, mirroring losses in commodity and stock markets, as many investors sold riskier assets on concerns about global growth and to lock in gains as year-end approaches.

The currency was also hit by broad-based gains by the U.S. dollar against a range of currencies for a second session as the greenback benefited from the drop in risk tolerance. [USD/]

The Canadian dollar touched a session low of C$1.0733 to the U.S. dollar, or 93.17 U.S. cents, its weakest level since Nov. 9.

The unit "hasn't really exhibited much strength at all. It seems to me a fair portion of this does fall to the U.S. dollar," said Eric Lascelles, chief economics and rates strategist at TD Securities.

Canada's currency finished at C$1.0699 to the U.S. dollar, or 93.47 U.S. cents, down from Thursday's close C$1.0635 to the U.S. dollar, or 94.03 U.S. cents.

The greenback's gain and falling risk appetite hit commodity prices, which heavily influence the Canadian dollar because the country is a commodity exporter.

Oil edged lower, dropping nearly 1 percent to below $77 a barrel, extending a 2 percent fall in the previous session. [O/R]

The market appeared to shrug off comments late on Thursday from Bank of Canada Governor Mark Carney who said Canada's economy performed worse than expected in the third quarter and risks further setbacks due to the sharp rise of the Canadian dollar. [nN19514256]

Finance Minister Jim Flaherty vowed on Friday to resist big, new spending measures in his next budget, but said it was too early to pull stimulus away from a still shaky economy. [ID:nN20237039]

A report out on Friday showed Canadian bankruptcies rose about 29 percent in September from a month earlier, as consumers felt the squeeze of rising debt and a weak job market. [ID:nN20314679]

Canadian economic reports due out next week include monthly retail sales and third-quarter current account data.

BOND PRICES MOSTLY FIRMER

With no major Canadian economic data out on Friday, most domestic bond prices tracked moves in the big U.S. Treasury market, where short-term issues rallied on fund demand before the year's end. [US/]

"It has long been our view that the Canada short end has been cheap and some of that mis-valuation is being worked out in the market today," said Lascelles.

"This is very much a day of adjustment as opposed to responding to any particular news."

The two-year bond rose 2.5 Canadian cents to C$99.99 to yield 1.255 percent, while the 30-year bond fell 30 Canadian cents to C$117.75 to yield 3.937 percent.

Canadian bonds outperformed their U.S. counterparts across much of the curve. The Canadian 10-year bond was 1.8 basis points above the U.S. 30-year yield, compared with 4.5 basis points on Thursday. (Reporting by Jennifer Kwan and Jeffrey Hodgson; editing by Rob Wilson)

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