CANADA FX DEBT-C$ weakens, hits seven-week low before paring losses

Mon Nov 23, 2015 4:56pm EST
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(Adds analyst quotes, details, updates prices)
    * Canadian dollar at C$1.3373, or 74.78 U.S. cents
    * Bond prices mixed across the maturity curve

    By Fergal Smith
    TORONTO, Nov 23 (Reuters) - The Canadian dollar hit a
seven-week low against the U.S. dollar on Monday, pressured by a
fresh sell-off in commodity markets, but it managed to pare
losses after Saudi Arabia issued a statement supportive of crude
oil prices.
    Hawkish comments over the weekend from Federal Reserve Bank
of San Francisco President John Williams and an eight-month high
for the U.S. dollar helped trigger another sell-off
in commodity markets, pressuring on crude oil.
    "Oil prices are the key driver," said Benjamin Reitzes,
senior economist and foreign exchange strategist at BMO Capital
Markets, after the Canadian dollar tracked fluctuation in the
price of crude oil.
    Reitzes expects the Canadian dollar to weaken further
against the greenback, pressured by anticipated Federal Reserve
tightening in December, a sidelined Bank of Canada and further
downside risk to oil prices.
    U.S. crude prices settled at $41.75 a barrel, down
0.36 percent, but up from a $40.41 low, while Brent crude
 added 0.67 percent to $44.96. 
    U.S. manufacturing and housing data were weaker than
expected, but the underlying trend for housing remained firm
, while Canada's data calendar was empty. 
    The Canadian dollar closed at C$1.3373 to the
greenback, or 74.78 U.S. cents, weaker than Friday's official
close of C$1.3345, or 74.93 U.S. cents.    
    The currency's strongest level of the session was C$1.3326,
while its weakest level was C$1.3436, in sight of the 11-year
low hit in September at 1.3457.
    Against the euro, the Canadian dollar was unchanged at     
C$1.4212 despite business activity in the euro zone picking up
at its fastest pace since mid-2011. 
    "The PMIs of Europe were solid, but nobody thinks that's
going to keep the ECB from easing," said Reitzes.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down 1
Canadian cent to yield 0.622 percent and the benchmark 10-year
 rising 6 Canadian cents to yield 1.618 percent.
    The curve flattened in sympathy with U.S. Treasuries, as the
spread between the 2-year and 10-year yields narrowed by more
than a basis point to below +100 basis points, indicating
outperformance for longer-dated maturities.
    The Canada-U.S. two-year bond spread widened 1.2 basis
points to -30.8 basis points, extending recent underperformance
by Treasuries at the front of the curve in anticipation of a Fed
rate hike as early as next month.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Dan