* C$ at C$0.9942 vs US$,
or $1.0058
* Blocked Petronas-Progress deal hurts
sentiment
* Bank of Canada eyed for rate tone change
By Alastair Sharp
TORONTO, Oct 22 (Reuters) - The Canadian
dollar hit a
two-month low against
the U.S. currency on Monday, hurt by a
blocked energy sector
takeover and as some traders bet that the
central bank will drop
its hawkish tone on interest rates on
Tuesday.
The federal government's shock decision to
block Malaysian
state oil firm Petronas'
C$5.17 billion bid for Progress Energy
took some shine off the currency, which gains
from
acquisition flows into
the country.
"It's certainly not helpful or
encouraging," said Jeremy
Stretch, head of foreign
exchange strategy at CIBC World Markets
in London. "It's
indicative of the perception that Canada may
not quite be as open for
business as some might hope or
anticipate."
At 8:14 a.m. (1214 GMT) the Canadian dollar
was
trading at C$0.9942 to
the greenback, or $1.0058, compared with
C$0.9932, or $1.0068, at
Friday's North American close.
The Canadian currency also weakened against
the euro, the
British pound and the
Swiss franc.
The blocked deal could also signal tough
times ahead for
Chinese oil group
CNOOC's C$15.1 billion offer for oil
producer Nexen.
"Clearly, having one knockback
heightens expectations of a
second," CIBC's
Stretch said, adding that of more immediate
interest is a Bank of
Canada rate decision due on Tuesday.
While investors aren't expecting a change
in borrowing costs
any time soon, they will
be closely watching to see if the
central bank drops
language about an eventual rate hike, after
the bank's governor
failed to mention it in a speech last week.
A Reuters poll released on Thursday
suggested the central
bank will postpone
interest rate hikes until the fourth quarter
of next year and will
likely water down, rather than eliminate,
its hawkish language.
Since Governor Mark Carney's speech last
Monday, the
Canadian dollar has
fallen 1.4 percent to its weakest since
mid-August.
The price of government bonds was lower
across the curve.
The two-year bond was off 3 Canadian cents
to
yield 1.100 percent,
while the benchmark 10-year bond
fell 38 Canadian cents to yield 1.886 percent.
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