CANADA FX DEBT-C$ retreats to April lows as oil prices dive on Greek vote

Mon Jul 6, 2015 5:11pm EDT
 
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(Adds strategist's comments, closing figures, details)
    * Canadian dollar ends at C$1.2652 or 79.04 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, July 6 (Reuters) - The Canadian dollar stumbled to
its weakest level against the greenback since April on Monday
following oil prices lower after Greeks voted more than 60
percent against the terms of a debt bailout package in a
referendum on Sunday.
     The price of crude, a key Canadian export, dived as much as
8 percent, hit also by emergency measures taken in China over
the weekend to prevent a stock market crash that could threaten
the world's second-largest economy. Chinese stock markets have
plunged some 30 percent in the past three weeks in what was
originally deemed a market "correction". 
    The oil plunge ended weeks of range-bound trading for oil.
U.S. crude settled at $52.53 a barrel, down $4.40, or 7.7
percent, while Brent crude settled down $3.78, or 6.3
percent, at $56.54. 
    Compounding the loonie's weakness was release of the Bank of
Canada's quarterly business outlook survey on Monday, which
showed cheap crude prices still hurting the economy.
 
    The Canadian dollar finished at C$1.2652 to the
greenback, or 79.04 U.S. cents, a sharp retreat from the Bank of
Canada's official close of C$1.2560, or 79.62 U.S. cents, on
Friday.
    The currency's strongest level of the session was C$1.2551,
while its weakest level was C$1.2664.
    "First, Canada gets caught in the crossfire in the flight to
safety (over Greece), and then there's some Canadian specific
factors with the Bank of Canada's business outlook survey that
still remains fairly weak," said David Tulk, chief Canada macro
strategist at TD Securities.
    "It's a commodity story wrapped up with nothing encouraging
on the macro front, overlaid with a flight to quality in the
U.S. I would even describe it as a perfect storm of Canadian
dollar weakness."
    The lackluster central bank survey helped push TD to predict
the Bank of Canada will cut its benchmark interest rate by 25
basis points to 0.50 percent next week. TD had been mulling its
rate-cut forecast since disappointing figures last week showed
the Canadian economy unexpectedly shrank in April.
 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3.5
Canadian cents to yield 0.464 percent and the benchmark 10-year
 rising 59 Canadian cents to yield 1.636 percent.
    The Canada-U.S. two-year bond spread was -12.9 basis points,
while the 10-year spread was -65.1 basis points.

 (Reporting by Solarina Ho; Editing by Meredith Mazzilli and
Peter Galloway)