CANADA FX DEBT-Loonie pulled lower as oil price drops
* Canadian dollar at C$1.1637 or 85.93 U.S. cents * Bond prices mostly higher across the maturity curve (Adds quotes, updates prices) By Leah Schnurr OTTAWA, Dec 22 (Reuters) - A drop in oil prices pulled the Canadian dollar lower against the greenback on Monday but the loonie was not expected to fall out of its recent trading range during this holiday-shortened week. The Canadian dollar has been hit hard in recent months by the plunge in oil prices and is down 8.7 percent for the year, putting it on track for its weakest year since 2008. Oil, which is a major export for Canada, settled down $1.87 at $55.26 a barrel after Saudi Arabia's oil minister said OPEC would not cut production at any price. "In the short term, the trend is not the friend for the loonie," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto. "It's obviously facing a lot of headwinds with oil prices and we still don't know how that's going to trickle down into the economy and potentially other sectors that are really leveraged to oil." The Canadian dollar ended the North American session at C$1.1637 to the greenback, or 85.93 U.S. cents, weaker than Friday's close of C$1.1608, or 86.15 U.S. cents. Canada's gross domestic product report for October on Tuesday is the only major economic data on tap this week, and the loonie is likely to be capped at the high C$1.15s unless the GDP figures surprise the market, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. Economic growth is forecast to have edged up 0.1 percent in October, slower than the 0.4 percent pace the month before. Analysts see the Canadian dollar's weakness continuing into 2015 even if oil prices recover. They say the currency also could be pressured by a hike in U.S. interest rates, which is expected to come next year and will most likely be implemented before any move on rates by the Bank of Canada. "With the Federal Reserve warning of a possible rate hike as early as April of next year, we're likely to see U.S. dollar-Canadian dollar trend higher," Smith said. Canadian government bond prices were mostly higher across the maturity curve, though the two-year was off 3 Canadian cents to yield 1.026 percent. The benchmark 10-year was up 11 Canadian cents to yield 1.801 percent. (Editing by Peter Galloway)
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