CANADA FX DEBT-C$ slumps vs weaker US$ as oil extends slide

Fri Dec 11, 2015 5:08pm EST
 
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(New throughout, updates prices and market activity, adds
strategist comment)
    * Canadian dollar settles st C$1.3742, or 72.77 U.S. cents
    * Bond prices rise across the maturity curve

    By Alastair Sharp
    TORONTO, Dec 11 (Reuters) - The Canadian dollar lost more
than a cent against a broadly weaker U.S. dollar and slumped
anew versus the euro on Friday, and as oil skidded toward an
11-year low and dragged down resource-linked currencies.
    "There's been a wholesale shift out of commodity currencies
today," said Jack Spitz, managing director of foreign exchange
at National Bank Financial, pointing to weakness also in the
Australian and New Zealand dollars and the Norwegian crown.
    The loonie, as Canada's currency is colloquially known, shed
some 2.7 percent of its value against the greenback this week as
the U.S. benchmark of crude broke through $40 a barrel and kept
falling from there to settle at $35.62 a barrel. Oil is a
major Canadian export.
    "The price of crude oil is falling," Spitz said. "It's very
important to Canada's economic health and it is falling,
precipitously."
    The Canadian dollar ended the session at C$1.3742
to the greenback, or 72.77 U.S. cents, sharply weaker than
Thursday's close of C$1.3632, or 73.36 U.S. cents and at its
weakest level since mid-2004.
    Against the euro it weakened to C$1.5126, a
10-week low.
    Crude oil prices approached 11-year lows as the
International Energy Agency (IEA) warned the global supply glut
could grow. 
    Spitz said momentum could take the loonie to C$1.40, perhaps
as soon as the end of the year, and that it could weaken even
further if crude falls below $30 a barrel. 
    A push above C$1.40 would be the currency's weakest level in
more than 12 years. 
    Investors were bracing for the U.S. Federal Reserve to hike
interest rates next week for the first time in nearly a decade,
with attention moving beyond that policy decision to any hints
on how quickly further increases could follow.
    The U.S. dollar fell on jitters ahead of the Fed meeting,
which Spitz attributed mostly to squaring of short positions and
repatriations in the euro and yen.
    Canadian government bond prices gained across the maturity
curve, with the two-year price up 13 Canadian cents
to yield 0.482 percent and the benchmark 10-year 
rising 72 Canadian cents to yield 1.408 percent.
    Canada's newly elected Liberal government said it would
force people eyeing expensive homes to provide bigger down
payments, a bid to cool parts of a hot housing market some fear
is developing into a bubble. 

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
David Gregorio)