CANADA FX DEBT-C$ slumps further to weakest in more than six years

Mon Jul 20, 2015 5:30pm EDT
 
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(Updates with closing figures and settlements, strategist
comment)
    * Canadian dollar at C$1.2997 or 76.94 U.S. cents
    * Bond prices were mixed across the maturity curve

    By Solarina Ho
    TORONTO, July 20 (Reuters) - The Canadian dollar finished
just under C$1.30 against its U.S. counterpart on Monday hit by
crude prices that dipped below $50 a barrel, a U.S. dollar that
reached a three-month high against a basket of currencies, and
Canadian wholesale trade figures showing a slump in May.
    There was little news to give the battered loonie a reprieve
after last week's Bank of Canada rate cut that has pushed the
currency to its weakest level against the greenback since March
2009.
    Wholesale trade fell by 1 percent in May, exceeding
economists' forecasts for a flat reading. Sales were also down 1
percent in volume terms. The figures come after hefty gains in
the previous two months. 
    "Weakness on the back of the wholesale trade numbers
shouldn't be surprising ... It suggests that May is going to be
probably flat for GDP and probably some downside risks there,"
said Benjamin Reitzes, senior economist at BMO Capital Markets.
    "It's still a difficult environment for the Canadian dollar,
and on top that oil is sub-50 bucks. And that's not good."
    The Canadian dollar, which was a mid-performer
against other key currencies, finished at C$1.2997 to the U.S.
dollar, or 76.94 U.S. cents, weaker than the Bank of Canada's
official close of C$1.2987, or 77.00 U.S. cents on Friday.
    The loonie briefly slid to C$1.3025, its weakest level since
March 2009. At that time, the currency had hit C$1.3066, which
was the weakest level since 2004.
    Strategists expect the currency to weaken near C$1.33 or
about 75 U.S. cents.
    "We're headed into uncharted territory. Well, it's charted,
but a long, long ways back," said Reitzes.
    On the oil front, important for crude export-heavy Canada,
the strong greenback, as well as signs of growing excess supply
kept prices under pressure. 
    U.S. August crude, set to expire on Tuesday, fell 74
cents to settle at $50.15 a barrel, having fallen to $49.85, its
first time below $50 since April. Brent September crude 
fell 45 cents to settle at $56.65, having traded between $56.33
and $57.44. 
    Canadian government bond prices were mixed across the
maturity curve with longer-term bonds falling. The two-year
 price slipped 1.5 Canadian cents, to 0.432 percent
and the benchmark 10-year fell 13 Canadian cents to
yield 1.577 percent.
    The Canada-U.S. two-year bond spread widened to -27.8 basis
points, while the 10-year spread widened to -80.3 basis points.
    

 (Reporting by Solarina Ho; Editing by W Simon and Lisa
Shumaker)