CANADA FX DEBT-C$ softens as U.S. debt deal talks stall

Reuters

* C$ at C$1.0380 vs US$, or 96.34 U.S. cents

* C$ weakens to multi-month lows against Aussie and New

Zealand dollars

* Bond prices mostly lower across curve

By Solarina Ho

TORONTO, Oct 15 (Reuters) - The Canadian dollar was weaker

against its U.S. counterpart on Tuesday as talks between

Washington lawmakers over raising the U.S. debt ceiling stalled

just days ahead of when the U.S. Treasury says the government

will reach its borrowing limit.

The Senate halted discussions on its own plan, as it waited

for the fractious Republican-controlled House of Representatives

to come up with an alternative proposal before Oct. 17, when the

government is expected to reach its limit of $16.7 trillion.

The U.S. government shutdown and any economic impact from

defaulting would not bode well for Canada, whose largest trading

partner is the United States.

"It's really hard to trace a lot of flows, there's really

not a lot of risk from people on the table ... there's too much

uncertainty and we're just waiting for stuff to clear in

Washington," said Darcy Browne, Managing Director at Capital

Markets Trading, CIBC.

"Dollar/Canada's really kind of smack in the middle of the

range and unattractive. There just hasn't been a story there."

The Canadian dollar finished its North American

session at C$1.0380 versus the greenback, or 96.34 U.S. cents,

softer than Monday's Thanksgiving holiday close at C$1.0349, or

96.63 U.S. cents.

The Canadian dollar's performance was mostly weaker against

other key currencies. It touched multi-month lows against its

commodities sister currencies, hitting its softest level against

the Australian dollar since early June and its weakest

level against the New Zealand dollar since late

April.

Domestically, Sales of existing homes in Canada jumped in

September from a year ago and prices rose, though analysts

cautioned the gains came partly on the back of depressed

activity in 2012 that followed tighter mortgage rules.

Figures from the Teranet-National Bank Composite House Price

Index showed Canadian home prices were unchanged in September

after hitting a record high the month before, suggesting the

housing market is cooling.

Government bond prices were mostly lower across the maturity

curve, with the two year bond off 44 Canadian cents

to yield of 1.231 percent and the benchmark 10-year bond

falling 45 Canadian cents to yield 2.649 percent.

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