CANADA FX DEBT-C$ slides as oil prices, China cast pall

Fri Aug 21, 2015 5:15pm EDT
 
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(Adds closing figures, strategist's comment, details)
    * Canadian dollar at C$1.3169 or 75.94 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Aug 21 (Reuters) - The Canadian dollar flirted with
multiyear lows against its U.S. counterpart on Friday, dropping
with oil prices as global risk sentiment sank following
manufacturing data from China that signaled slowing economic
growth in the world's biggest energy consumer.
    The gloom that swept through equity and commodity markets
around the world overshadowed Canadian data that had helped give
the currency a bounce earlier in the day.
    "In terms of USD/CAD, I think it comes down to today's
action in equities. It doesn't have a whole lot to do with the
Canadian data," said Lennon Sweeting, currency strategist at
USForex in Toronto.
    "Markets are having a tough time not focusing on China and
growth concerns in China, so that's why we're seeing such a
surge in dollar strength right now against the loonie." 
    The Canadian dollar finished at C$1.3169 to the
greenback, or 75.94 U.S. cents, sharply weaker than the Bank of
Canada's official close on Thursday of C$1.3081, or 76.45 U.S.
cents. 
    The currency has been fairly range-bound through August,
failing to sustain trading above C$1.32. It weakened to C$1.3193
on Friday, however, not far from the 11-year low of C$1.3213
touched earlier this month.
    The price of oil, a key Canadian export, suffered its eighth
straight week of declines, the longest losing streak since 1986.
U.S. crude ended 2 percent lower, and at one point traded below
$40 a barrel for the first time since the 2009 financial crisis.
    The loonie had briefly rallied on Friday after the release
of Canadian inflation and retail sales data, but it pulled back
as investors digested the details.
    The annual inflation rate in July rose 1.3 percent, just shy
of the 1.4 percent forecast by economists, as higher prices for
food and clothing offset cheap energy prices. Retail sales rose
0.6 percent in June, topping expectations for a 0.2 percent
rise. Volumes were flat, however. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3 Canadian
cents to yield 0.334 percent and the benchmark 10-year
 climbing 20 Canadian cents to yield 1.269 percent.
    The Canada-U.S. two-year bond spread narrowed to -28.7 basis
points, while the 10-year spread narrowed to -77.6 basis points.

 (Editing by Peter Galloway)