CANADA FX DEBT-C$ firms on profit taking, cheap oil keeps loonie under pressure

Tue Dec 16, 2014 10:27am EST
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* Canadian dollar at C$1.1626 or 86.01 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Dec 16 (Reuters) - The Canadian dollar firmed
slightly against its U.S. counterpart on Tuesday after four
straight days of declines as investors booked some profits, but
with no bottom in sight for plunging crude prices and global
market sentiment negative, the loonie was expected to retreat
    Volatile markets sent investors fleeing to safety a day
after the Russian central bank hiked interest rates 650 basis
points to 17 percent in a failed attempt to halt a collapse in
the ruble and as oil prices fell to new 5-1/2-year lows.
    Activity in China's factory sector contracted this month for
the first time in seven months, the latest in a string of weak
economic indicators that added to concerns about oil demand.
    China is the second-largest oil consumer after the United
States while Canada is a major exporter of oil.
    "What you're seeing is a classic risk-off scenario ... Right
now, we're brushing up against technical resistance levels, so
there has been some measure of profit taking," said Bipan Rai,
director of foreign exchange strategy at CIBC World Markets.
    "We still see the market as being heavily biased to buying
U.S. dollar against the Canadian dollar on dips lower for
    At 9:58 a.m. (1458 GMT), the Canadian dollar was at
C$1.1626 to the greenback, or 86.01 U.S. cents, stronger than
Monday's close of C$1.1656, or 85.79 U.S. cents. Earlier, it was
trading at levels not seen since July 10, 2009.
    Rai said the loonie was somewhat oversold in the short term
and that a brief consolidation phase was typical following sharp
moves in the currency. He added that the near-term target of
C$1.1685 was at risk of being breached on Tuesday or Wednesday.
    "And we see further weakness beyond here into the first half
of next year, which could see USD/CAD trading close to the
C$1.20 mark," said Rai.
    In Canada, data showed that factory sales fell by a
more-than-expected 0.6 percent in October from September.
Foreign investment in Canadian securities strengthened to C$9.53
billion from C$4.64 billion between October and September, a
sign that the country remains an attractive destination for
non-residents seeking stable returns. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 5.5 Canadian
cents to yield 0.949 percent and the benchmark 10-year
 rising 33 Canadian cents to yield 1.748 percent.

 (Reporting by Solarina Ho; Editing by James Dalgleish)