CANADA FX DEBT-Sinking crude sends C$ to weakest close in more than 5 years

Mon Dec 8, 2014 4:49pm EST
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(Adds details, fresh comment, closing figures)
    * Canadian dollar closes at C$1.1482, or 87.09 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Dec 8 (Reuters) - The Canadian dollar was broadly
weaker against all its key counterparts on Monday and closed at
its weakest level in more than five years against the U.S.
dollar as crude prices tumbled to multi-year lows.
    Oil slumped 4 percent in one of its biggest declines this
year on market expectations of deeper price cuts next year and
after the chief executive of Kuwait's national oil company said
prices were likely to remain around $65 a barrel for the next
six to seven months.
    Canada is a major exporter of oil. The impact of crude
prices was also felt on the Toronto Stock Exchange,
where the energy subgroup nose-dived 6.5 percent.
    "The Canadian dollar decline to start the week was entirely
driven by oil weakness as the post-OPEC lows give way," said
Adam Button, currency analyst at ForexLive in Montreal.
    "Money is flooding out of Canada and out of the tar sands.
At this point, a fear trade has gripped the oil and gas industry
and Canada is a very easy target any time there's trouble in
    The Canadian dollar finished at C$1.1482 to the
U.S. dollar, or 87.09 U.S. cents, its weakest close since July
13, 2009. The currency had ended at C$1.1432, or 87.47 U.S.
cents, on Friday.
    Button said the Canadian dollar's retreat could accelerate
rapidly if the currency breaks above the C$1.15 level and said a
more dramatic decline was averted on Monday by some large sell
orders that protected that level.
    CIBC said in a research note on Monday that it expects the
Canadian dollar to hit C$1.23, or 81 U.S. cents, by the third
quarter of 2015.
    The Canadian dollar was already under pressure from a
rallying greenback following Friday's U.S. labor market data,
which showed strength in both wage growth and job creation in
the United States.
    In Canada, the employment figures did little to convince
market participants the Bank of Canada will be changing its tune
on monetary policy any time soon.
    The loonie saw little reaction to economic data on Monday
that showed Canadian building permits edged higher in October
following sharp gains in September, and housing starts climbed
in November.  
    Canadian government bond prices were higher across the
maturity curve, with the two-year adding 4.5 Canadian
cents to yield 1.025 percent and the benchmark 10-year
 jumping 55 Canadian cents to yield 1.895 percent.

 (Reporting by Solarina Ho; Editing by Bernadette Baum and
Leslie Adler)