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