CANADA FX DEBT-C$ breaches C$1.16 as crude's retreat hits harder

Mon Dec 15, 2014 10:26am EST
 
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* Canadian dollar at C$1.1595 or 86.24 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Dec 15 (Reuters) - The Canadian dollar fell through
C$1.16 to the U.S. dollar on Monday, touching its weakest level
in 5-1/2 years as crude prices hit new multiyear lows.
    The Organization of the Petroleum Exporting Countries
reaffirmed on Sunday its intention not to cut output despite a
global fuel glut, reasoning that any output reduction would have
little impact on price but would mean ceding market share.
    Canada is a major exporter of crude and the loonie's
fortunes have tracked those of the oil price since it started
dropping in June, with the Canadian currency falling to levels
not seen since July 2009.
    "Last week, we saw Canada begin to post losses against some
of the other majors and that was for the first time in quite
some time," said Brad Schruder, director, foreign exchange
sales, at BMO Capital Markets.
    "There's now talk of $45 oil, which I think is a little bit
aggressive at the moment, but if this trend continues, I
wouldn't be surprised if you saw USD/CAD hovering near just shy
of C$1.20."  
    At 9:59 a.m. (1459 GMT), the Canadian dollar was at
C$1.1595 to the greenback, or 86.24 U.S. cents, weaker than
Friday's close of C$1.1572, or 86.42 U.S. cents. Earlier, it
touched C$1.1606, or 86.16 U.S. cents.
    "If you need to buy U.S. dollars you most certainly need to
err on the side of caution in these last couple of weeks of the
year because the storm is upon us," Schruder said. He added,
however, that a C$1.20 loonie would likely be the trend for
January, not December.
    All eyes will be on the U.S. Federal Reserve on Wednesday to
see how oil's retreat fits into the central bank's
decision-making. 
    A slew of Canadian economic data, including inflation
figures for November on Friday, will also be in focus, but
Schruder said that given the influence of oil prices, the
figures will be heavily discounted by the market.
    Canadian government bond prices were mixed across the
maturity curve with shorter-term treasury bills higher and
longer-term bonds lower. The two-year was down 3.5
Canadian cents to yield 0.98 percent and the benchmark 10-year
 was off 27 Canadian cents to yield 1.787 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)