CANADA FX DEBT-C$ drops as trade data adds to its woes

Wed Jan 7, 2015 10:15am EST
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* Canadian dollar at C$1.1851 or 84.38 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 7 (Reuters) - The Canadian dollar weakened
further against the greenback on Wednesday as a bigger than
forecast Canadian trade deficit for November compounded the
negative tone that has pervaded the market during the oil-price
    Canada's trade deficit was C$644 million, sharply higher
than the C$300 million that market operators had expected, with
exports showing their biggest monthly drop in more than two
years, down 3.5 percent. 
    "I think the trade data in general has been receiving a
little bit more attention over the past several months just
given that it's become such a critical part of the narrative for
the Bank of Canada," said Mazen Issa, senior Canada macro
strategist at TD Securities.
    The Bank of Canada, which has repeatedly expressed concern
about the struggling export sector, is widely expected to keep
interest rates on hold until after the U.S. Federal Reserve
makes a move on rates. Canada's economic recovery has been
lagging that of the United States.
    The Canadian dollar was trading at C$1.1851 to the
greenback, or 84.38 U.S. cents, weaker than Tuesday's finish of
C$1.1828, or 84.55 U.S. cents. The currency has been hitting its
weakest levels in more than 5-1/2 years.
    "There's just a lot of forces going on in the market place
right now and it generally has a negative tone to it...a higher
USD/CAD is probably the path of least resistance from this point
on," Issa said.
    Battered oil prices were steady on Wednesday after losing
some 10 percent just this week, but U.S. crude remained around
$48.50 a barrel after having fallen below $47 earlier. Canada is
a major exporter of the commodity and the Canadian dollar's
retreat has largely shadowed that of oil prices. 
    Canadian government bond prices were mixed across the
maturity curve, with longer-term securities falling. The
two-year bond was down 3 Canadian cents to yield 0.97
percent and the benchmark 10-year bond was off 25
Canadian cents to yield 1.665 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)