CANADA FX DEBT-C$ nears 2009 low as oil, greenback fall

Thu Jul 23, 2015 4:44pm EDT
 
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(Updates throughout with strategist comment, final currency
levels)
    * Canadian dollar at C$1.3039 or 76.69 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, July 23 (Reuters) - The Canadian dollar ended
little changed against its U.S. counterpart on Thursday as
pressure from U.S. crude prices, which slid below $49 a barrel
on supply and demand worries, were offset by a weaker U.S.
dollar.
    The loonie received a brief boost from
stronger-than-expected Canadian retail sales data, but was
quickly overshadowed by a surprisingly steep fall in weekly U.S.
jobless claims that helped the U.S. dollar pare earlier losses.
    "Today's data on retail sales is a little bit better, but
it's also rear-view looking. You saw how short-lived the move
was," said Amo Sahota, director at Klarity FX in San Francisco.
"The U.S. jobless claims took the shine off." 
    A drop in U.S. Treasury yields to two-week lows on growing
Wall Street losses and deflation worries from falling commodity
prices kept the greenback under pressure, which fell about half
a percent against a basket of key currencies.
    The Canadian dollar finished at C$1.3039 to the
greenback, or 76.69 U.S. cents, firmer than the Bank of Canada's
official close of C$1.3037, or 76.70 U.S. cents on Wednesday.
    The loonie moved between C$1.2946 and C$1.3047 during the
session, trading just shy of C$1.3066, its weakest level since
March 2009. Once it breaks through that level, the currency will
be trading at levels not seen since 2004.
    "It's still part of a broader commodity/currency fallout
here...with oil below $50 a barrel, that's going to keep
pressure on the loonie still. Nothing's materially changed since
that (25 basis point rate cut) Bank of Canada announcement,"
said Sahota.
    U.S. crude fell 74 cents to settle at $48.45 a
barrel, the lowest settlement since March 31. Oil is a major
Canadian export.
    The U.S. claims data, the lowest since 1973, was the latest
indicator that the U.S. economy may be ready for a rate hike by
the Federal Reserve. 
    Markets may be biding their time ahead of next week's
monetary policy decision due on Wednesday, when the Fed is
expected to provide clearer guidance on when it will resume
raising rates. Many economists and strategists are currently
betting on September hike.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year price up 0.5
Canadian cent to yield 0.429 percent and the benchmark 10-year
 up 36 Canadian cents to yield 1.501 percent.
    The Canada-U.S. two-year bond spread was minus 26.9 basis
points, while the 10-year spread was a differential of 77 basis
points.

 (Reporting by Solarina Ho; Editing by Peter Galloway and Diane
Craft)