CANADA FX DEBT-C$ propped by rebound in crude following five-year lows

Tue Dec 9, 2014 4:45pm EST
 
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(Updates with fresh comment, closing figures, additional
details)
    * Canadian dollar at C$1.1440 or 87.41 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Dec 9 (Reuters) - The Canadian dollar strengthened
on Tuesday after touching its weakest level against the U.S.
dollar in more than five years, helped by a bounce in crude
prices after Monday's big sell-off.
    Oil, which has tanked more than 40 percent since June and
sank about 4 percent in the previous session, set new five-year
lows on Tuesday before recovering as market participants
searched for some stability. 
    The Canadian dollar has been particularly sensitive to
movements in the price of oil due to the country's heavy
concentration of producers.
    "It's trading off oil right now; there's not a whole lot of
data to go off of this week," said Benjamin Reitzes, senior
economist at BMO Capital Markets. "Given the price of oil and
the likelihood that the trend is lower and momentum is lower, I
think it's perfectly reasonable that we're where we are now
between C$1.14 and C$1.15."
    The Canadian dollar, which briefly broke the key
psychological C$1.15 level during overnight trading, ended the
session at C$1.1440 to the greenback, or 87.41 U.S. cents. This
was stronger than Monday's close of C$1.1482, or 87.09 U.S.
cents, its weakest close since July 13, 2009.
    A combination of drivers is expected to keep the Canadian
dollar under pressure, according to David Tulk, chief Canada
macro strategist with TD Securities, pointing to expected
further weakness for crude, an economy that lags the United
States and recent disappointing results from Canadian banks.
    Reasonably upbeat U.S. retail sales data on Thursday and a
slightly more hawkish Federal Reserve would give even more lift
to the U.S. dollar, Tulk said.
    Also helping the loonie was a weaker U.S. dollar, which fell
for a second straight day as investors booked profits from the
currency's recent gains. Cautious comments from two centrist
Federal Reserve policymakers on Monday helped put a slight
damper on the rally as well.
    Fed policy makers have been discussing when the U.S. central
bank my drop the closely watched phrase "considerable time" when
describing how long interest rates will remain near zero. The
Fed's next policy meeting is scheduled for next week.
    Canadian government bond prices were higher across the
maturity curve, with the two-year rising half a
Canadian cent to yield 1.022 percent and the benchmark 10-year
 adding 12 Canadian cents to yield 1.881 percent.

 (Reporting by Solarina Ho; Editing by Lisa Von Ahn and James
Dalgleish)