CANADA FX DEBT-C$ holds near 5-1/2-year lows as oil dominates

Tue Jan 13, 2015 4:53pm EST
 
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(Adds comment, closing figures, details)
    * Canadian dollar at C$1.1955 or 83.65 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 13 (Reuters) - The Canadian dollar ended
moderately stronger against the greenback on Tuesday after
trading within a hairsbreadth of C$1.20, as crumbling crude
prices continued to drive direction.
    Oil, a major Canadian export, sank about 5 percent before
recouping some losses. U.S. crude closed at $45.89 a
barrel after hitting $44.20, some 60 percent below the highs of
June 2014 and its lowest in nearly six years. 
    The price collapse, driven by excess inventory, is expected
to drag on Canada's economic growth this year but not in a
"drastic" manner, the Bank of Canada's deputy governor Timothy
Lane said in a speech on Tuesday. 
    Lane was clear on the central bank's view that cheap oil was
bad for the economy despite mitigating factors but stopped short
of saying an interest rate hike could be delayed.
    "He's more or less dovishly saying that it's helpful if the
Canadian dollar is weak," said Darcy Browne, Managing Director,
Capital Markets Trading, CIBC. 
    The Canadian dollar finished at C$1.1954 to the
greenback, or 83.65 U.S. cents, modestly stronger than Monday's
close of C$1.1967, or 83.56 U.S. cents.
    The loonie was outperforming most major currencies although
at one point during the session it touched as low as C$1.1993,
or 83.38 U.S. cents, its weakest since April 2009.
    Analysts said C$1.20 was a key psychological level as well
as a key barrier in the options market but that the weaker trend
is firmly in place.
    "Coupled with yesterday's negative business outlook for
Canada and continued weaker oil, (the Canadian dollar) just
keeps grinding that way," he said.
    A Bank of Canada survey issued on Monday showed investment
intentions were sharply lower compared with the previous survey,
primarily due to sinking crude prices that have dampened
expectations of Western Canadian companies. 
    Canadian government bond prices were generally higher across
the maturity curve. The two-year bond was up half a
Canadian cent to yield 0.919 percent and the benchmark 10-year
 was flat, with a yield of 1.605 percent.

 (Editing by Peter Galloway and James Dalgleish)