CANADA FX DEBT-C$ hits weakest level in nearly six years after Fed

Thu Jan 29, 2015 4:35pm EST
 
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(Adds final figures, comments and details)
    * Canadian dollar at C$1.2611 or 79.30 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 29 (Reuters) - The Canadian dollar weakened to
levels not seen in nearly six years against its U.S. counterpart
on Thursday, extending losses from the previous session after
the Federal Reserve maintained its view that U.S. interest rates
could rise this year.
     A combination of cheap crude prices and diverging monetary
policies between the Fed and the Bank of Canada, sharply
illustrated by last week's shock rate cut in Canada and the
Fed's upbeat outlook on Wednesday, have pushed the Canadian
dollar firmly onto a weaker path. 
    "There's a lot of talk about the Bank of Canada lowering
rates again, especially if crude continues to trade as softly as
it is," said David Bradley, director of foreign exchange trading
at Scotiabank, adding that another rate cut could push the
currency to C$1.30.
    "(Bank of Canada Governor Stephen) Poloz basically said
after the last cut that they've still got lots of tricks up
their sleeves should they need to act further on the back of
domestic economic weakness."
    Poloz called the bank's stimulative move last week
"insurance" against the impact of low crude prices on Canada, a
major oil producer, and markets are now pricing in about a 57
percent probability of another rate cut in March. 
    The Canadian dollar ended at C$1.2611 to the
greenback, or 79.30 U.S. cents, nearly a cent weaker than
Wednesday's close of C$1.2520, or 79.87 U.S. cents, and its
weakest finish since the March 31, 2009.
    At one point in the session, the currency tumbled to
C$1.2678, or 78.88 U.S. cents, its weakest intraday level since
April 1, 2009.
    The benchmark U.S. oil price ended marginally higher on
Thursday, but earlier in the day it fell below $44 a barrel for
the first time since April 2009.
    "We're still well below $50 (barrel) and the general trend
here ... is that oil prices is going to stay soft if not weaken
further," said Shaun Osborne, chief currency strategist at TD
Securities.
    For further direction, market participants will be looking
at a slew of economic data from the United States on Friday and
November gross domestic product figures in Canada. 
    Canadian government bond prices were mixed across the
maturity curve, with the longer-term securities lower. The
two-year was down 4 Canadian cents to yield 0.455
percent and the benchmark 10-year was off 16
Canadian cents to yield 1.369 percent.

 (Additional reporting by Alastair Sharp; Editing by Meredith
Mazzilli and Peter Galloway)