CANADA FX DEBT-C$ falls to 5-1/2 year low as oil keeps falling
(Updates with fresh comment, closing figures.) * Canadian dollar at C$1.1967 or 83.56 U.S. cents * Oil prices continue to slide, U.S. dollar strong * Bond prices higher, 10-year yield lowest since mid-2012 By Andrea Hopkins TORONTO, Jan 12 (Reuters) - The Canadian dollar hit a fresh 5-1/2 year low against the greenback on Monday as oil prices continued to tumble, pushing the currency towards a key psychological support level at C$1.20 to the U.S. dollar. Oil is a major Canadian export and crude prices showed no sign of escaping their downward spiral. Meanwhile, the U.S. dollar edged higher as investors expecting a stronger greenback reloaded after it weakened on Friday on data which showed a surprise fall in U.S. wages in December. Crude prices fell 5 percent to their lowest in nearly six years, extending the second-deepest rout on record after Goldman Sachs said prices would fall further and stay near $40 for most of the first half of 2015, and Gulf producers showed no sign of cutting output. U.S. crude settled at $46.07. "It's a little bit shocking just the velocity of how quick the loonie has dropped over the last couple of months," said Rahim Madhavji, president at KnightsbridgeFX.com. "For the loonie to stop its descent, oil's going to need to stabilize first ... right now it really doesn't look good for oil." The Canadian dollar finished at C$1.1967 to the greenback, or 83.56 U.S. cents. That was much weaker than Friday's finish of C$1.1866, or 84.27 U.S. cents, and the currency's lowest point since May 2009. It was at around C$1.16 at the start of 2015, and at C$1.06 in mid-2014. Scotiabank's chief currency strategist Camilla Sutton said analysts were looking to C$1.20 as a key level where the Canadian dollar could find support. "We're now talking about whole numbers and C$1.20 is the next key level. It's a very important one because it is a big psychological shift going from the teens up to C$1.20," she said. Market watchers are awaiting a Tuesday speech Bank of Canada Deputy Governor Timothy Lane in which he's expected to provide guidance on how oil prices are affecting Canada's economy. "That's an important one because hopefully we'll get a little bit more clarity on how the Bank of Canada is using new oil prices in their modeling," Sutton said. Canadian government bond prices were higher across the maturity curve. The two-year rose 4.5 Canadian cents to yield 0.925 percent and the benchmark 10-year climbed 39 Canadian cents to yield 1.613 percent. That is its lowest yield since mid-2012. (Additional reporting by Solarina Ho and Alastair Sharp; Editing by Peter Galloway and Alan Crosby)
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