CANADA FX DEBT-C$ strengthens in the teeth of greenback rally, diving oil

Mon Jan 5, 2015 5:00pm EST
 
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(Adds comments, details and closing figures)
    * Canadian dollar closes at C$1.1749 or 85.11 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Jan 5 (Reuters) - The Canadian dollar strengthened
on Monday despite a collapse of oil prices below $50 a barrel
and a U.S. dollar rally that showed no sign of abating.
    The U.S. dollar surged broadly against most major currencies
pushed as the euro dropped to its lowest level since early 2006,
spurred by rising political concerns in Europe ahead of
elections in Greece and expectations of easier monetary policy
in the euro zone. 
    Crude prices plunged as much as 6 percent to the cheapest
level since the spring of 2009 as anxiety over soft demand and
excess global supply continued to stalk the market. Canada is a
major crude exporter and the Canadian dollar has been hit hard
by plunging oil prices since the middle of last year. 
    "The strength of the U.S. dollar really spilled over into
2015, and the Canadian dollar's been caught in the move. That
said, the Canadian dollar is impressive today," said Adam
Button, currency analyst at ForexLive in Montreal.
    "That strength on a day when oil is just getting pummeled
... That speaks to some resilience in the Canadian dollar, but
it also represents a rebound from the weakness that we had on
Friday."
    The Canadian dollar, which was stronger on Monday
against nearly every major currency except the Japanese yen
, ended the session at C$1.1749 to the greenback, or
85.11 U.S. cents. 
    That was stronger than Friday's finish at C$1.1790, or 84.82
U.S. cents, the last trade recorded in Thomson Reuters data and
the Bank of Canada's official close of C$1.1762, or 85.02 U.S.
cents.
    At one point during the session, the loonie retreated to
C$1.1843, or 84.44 U.S. cents, its weakest level since May 4,
2009, briefly extending Friday's more than 1 percent plunge.
    Button said he sees more big drops ahead for the loonie as
the U.S. dollar continues to gain momentum, and forecasts the
currency could hit C$1.19 to C$1.20 by the end of January.
    "Right now, it's a rock and roll market. The volatility from
the end of 2014 certainly hasn't gone away," he said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year rising 4 Canadian
cents to yield 0.981 percent and the benchmark 10-year
 climbing 43 Canadian cents to yield 1.695 percent.

 (Editing by Peter Galloway)