CANADA FX DEBT-Loonie set to close out worst year since 2008

Wed Dec 31, 2014 9:55am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* Canadian dollar at C$1.1595 or 86.24 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    OTTAWA, Dec 31 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Wednesday, getting some
respite on the last day of a tough 2014 that has the loonie on
track for its worst performance in six years.
    The Canadian dollar started the year as many investors' top
short position as the Bank of Canada was expected to remain
    After a sell-off in the first three months, the loonie
managed to regain some ground into the summer, only to be
knocked lower again by the plunge in oil prices and a Federal
Reserve that is moving closer to raising interest rates.
    The Canadian dollar is down 8.4 percent for the year, its
biggest decline since 2008, the start of the global financial
    "It's definitely been a challenging one for the loonie and
is likely to continue into 2015," said Scott Smith, senior
market analyst at Cambridge Mercantile Group in Calgary.
    At the top of investors' minds in 2015 is a Fed that is
expected to lift rates before the Bank of Canada does, extending
favor for the greenback to the detriment of the loonie.
    The potential for another slide in oil prices is a big risk
for the currency, as oil is a major export for Canada. The
weakness continued on Wednesday with crude down $1.23 at
$52.89 a barrel.
    Despite the drop in oil, the Canadian dollar found
some strength in morning trade and was at C$1.1595 to the
greenback, or 86.24 U.S. cents, stronger than Tuesday's close of
C$1.1607, or 86.15 U.S. cents.
    "Today what we're seeing is just technical trading and some
year-end rebalancing that's driving this loonie strength," said
    While the loonie is unlikely to firm much beyond C$1.16,
that level could act as a midpoint until the currency takes
another leg lower in the new year, said Smith. 
    Investors continued to keep an eye on developments out of
Greece, which dissolved parliament ahead of next month's
election. The early election has cast some doubt on the
country's international bailout. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.011 percent and the benchmark 10-year up
14 Canadian cents to yield 1.796 percent.