CANADA FX DEBT-Oil rout pulls C$ to its weakest close in 5-1/2 years

Fri Dec 12, 2014 4:46pm EST
 
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(Adds comment, closing figures and details)
    * Canadian dollar at C$1.1572 or 86.42 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Dec 12 (Reuters) - The Canadian dollar closed at
its weakest level against the greenback in 5-1/2 years on Friday
as new worries over a drop in oil demand spurred by an
International Energy Agency report sent crude prices plunging.
    The agency, which coordinates the energy policies of
industrialized countries, forecast an increase in global
supplies next year but cut its outlook for global oil demand by
230,000 barrels per day. 
    U.S. crude prices have been nearly halved in the past six
months, and they fell more than 3 percent on Friday as the
market continued to hunt for an elusive bottom. 
    Canada is a major oil exporter and the currency's
sensitivity to crude prices has increased as oil prices have
plunged. The country's main stock index, home to a hefty number
of oil and gas producers, has dived more than 5 percent this
week, while the index's energy subgroup has plummeted 13.4
percent.  
    "Really, the story and the catalyst for the Canadian dollar
is that the loonie is just covered in oil. It's pretty much a
blood bath," said Rahim Madhavji, president at
KnightsbridgeFX.com. "It seems like there is no end in sight in
the short term."
    The Canadian dollar ended the session at C$1.1572
to the greenback, or 86.42 U.S. cents, its weakest close since
July 10, 2009. It touched C$1.1591, or 86.27 U.S. cents, earlier
in the session. It had finished at C$1.1527, or 86.75 U.S.
cents, on Thursday. 
    The currency has retreated 1.2 percent since last Friday.
    "We haven't been at these levels in over five years, so it
starts to make the whole numbers pretty important, like C$1.16,
C$1.17," said Camilla Sutton, chief currency strategist at
Scotiabank.
    Next week, Canada will release a slew of top-tier economic
data, including manufacturing sales, wholesale trade, retail
sales for October, and November inflation figures. The U.S.
Federal Reserve will also meet to make its next policy decision.
    "So we'll have a really good update on how the economic
outlook is unfolding," Sutton said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year rising 10 Canadian
cents to yield 0.969 percent, and the benchmark 10-year
 jumping 59 Canadian cents to yield 1.7961 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)