CANADA FX DEBT-C$ fall blunted as oil snaps losing streak

Thu Jan 8, 2015 4:56pm EST
 
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(Adds closing figures, comment and details)
    * Canadian dollar at C$1.1836 or 84.49 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 8 (Reuters) - The Canadian dollar was modestly
weaker against its U.S. counterpart on Thursday as oil prices
stabilized on better than expected U.S. economic data and
falling U.S. crude stockpiles.
    Global oil prices were little changed, with Brent crude just
above $50 a barrel, after tumbling more than 50 percent since
June as Saudi Arabia and other oil-producing countries have
resisted production cuts despite excess supply and waning
demand. Canada is a major crude exporter, and the Canadian
dollar has been highly sensitive to the sharp price declines.
    "After really holding its own in late December ... the first
couple of days of the year we saw (the Canadian dollar) give
that up," said Amo Sahota, director at Klarity FX in San
Francisco, noting the correlation between the moves of oil and
the loonie is at its strongest in quite some time.
    Market participants have been searching for a bottom for oil
prices and many think the pause in crude's fall will be
short-lived. 
    "(Forty-dollar oil) would mean more Canadian dollar
weakness," Sahota said. "We just think the current pace of
Canadian dollar weakness is over-extended." 
    The Canadian dollar, which retreated more than 1.5
percent since the new year to 5-1/2 year lows, closed at
C$1.1836 to the greenback, or 84.49 U.S. cents. That was weaker
than Wednesday's finish of C$1.1820, or 84.60 U.S. cents.
    In the latest sign of a strong U.S. economy, the number of
Americans filing new claims for unemployment benefits fell last
week and job cuts declined sharply in December, suggesting a
tightening labor market. 
    Camilla Sutton, chief currency strategist at Scotiabank,
noted that the strength of the greenback has been a dominant
factor in the currency market.
    "All in all CAD's been pushed and pulled by market trends,"
she said. "There's still a lot of U.S. dollar strength as the
overarching theme for most currencies. Canada is just hovering
in between."
    Investors were also awaiting employment figures for December
for the United States and Canada, which are due on Friday.
Forecasters polled by Reuters expected 15,000 new jobs in Canada
with the unemployment rate unchanged at 6.6 percent.
    Canadian government bond prices were mixed across the
maturity curve with longer-term maturities falling. The two-year
 fell 3 Canadian cents to yield 0.982 percent and the
benchmark 10-year declined 45 Canadian cents to
yield 1.706 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)