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CANADA FX DEBT-C$ tumbles to near 5-wk low as stocks slump

Published 06/22/2009, 10:52 AM
Updated 06/22/2009, 11:08 AM

* C$ falls to lowest level since May 20

* Bonds push higher in flight to safety (Adds details)

TORONTO, June 22 (Reuters) - The Canadian dollar fell to its lowest level against the U.S. currency in nearly five weeks on Monday, pressured by broad-based rally by the greenback and slumping equity markets.

World stocks tumbled on Monday as caution ahead of this week's data and the Federal Reserve meeting weighed on assets seen as riskier. [ID:nLM712211] Toronto's main equity index slumped more than 3 percent on lower commodity prices and a gloomy economic outlook from the World Bank. [ID:nTOR004681]

Typically, movements in stock markets are a gauge of investors' appetite for risk.

At one point, the currency dropped to C$1.1545 to the U.S. dollar, or 86.62 U.S. cents, its lowest level since May 20. The move was in line with other high-yielding currencies, such as the Australian and New Zealand dollars, which succumbed to worries about global growth prospects. [ID:nN22499122]

"We're starting the week again with risk aversion as the dominant theme. As a result, you have U.S. dollar strength and your commodity-based currencies under significant pressure," said Matthew Strauss, senior currency strategist RBC Capital Markets.

At 10:15 a.m. (1415 GMT), the Canadian dollar was at C$1.1517 to the U.S. dollar, or 86.83 U.S. cents, down sharply from C$1.1351 to the U.S. dollar, or 88.10 U.S. cents at Friday's close.

The price of oil , a key Canadian export, fell towards $67 a barrel, pressured by a stronger U.S. dollar and weaker European equities. [ID:nSYD456749]

BONDS HIGHER

Canadian bond prices drove higher in a flight-to-safety bid in response to tumbling equity markets.

The benchmark two-year government bond rose 5 Canadian cents to C$99.97 to yield 1.265 percent, while the 10-year bond gained 29 Canadian cents to C$102.19 to yield 3.487 percent.

The 30-year bond advanced 50 Canadian cents to C$117.75 to yield 3.945 percent. The comparable U.S. issue yielded 4.474 percent. (Reporting by Ka Yan Ng and Jennifer Kwan; editing by Rob Wilson)

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