CANADA FX DEBT-C$ strengthens as oil prices push higher

Wed Dec 23, 2015 4:37pm EST
 
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* Canadian dollar at C$1.3857 or 72.17 U.S. cents
    * Bond prices rise across the maturity curve

 (Adds details, quote, updates prices)
    By Leah Schnurr and Euan Rocha
    OTTAWA/TORONTO, Dec 23 (Reuters) - The Canadian dollar
strengthened against the greenback on Wednesday as a bounce in
oil prices offset weak economic data at home.
    Despite the day's gain, the loonie is still on track for its
worst year since the 2008 financial crisis. After this year's
plunge in oil prices, two interest rate cuts from the Bank of
Canada and the start of higher interest rates in the United
States, the currency is down about 20 percent.
    A surprise drop in U.S. crude inventories boosted the price
of oil $1.36 to $37.50 a barrel. The Canadian dollar has been
closely correlated to the price of oil, which is a major export
for Canada. 
    That helped the loonie shrug off a disappointing set of
domestic data that showed the economy stalled in October, while
retail sales rose less than expected. The currency touched a
session low against the greenback immediately following the
reports before regaining strength. 
    "Oil is still leading the way in terms of the movement for
the Canadian dollar," said Rahim Madhavji, president at
KnightsbridgeFX.com.    
    The Canadian dollar ended the North American
session at C$1.3857 to the greenback, or 72.17 U.S. cents,
stronger than Tuesday's close of C$1.3937, or 71.75 U.S. cents.
    Heading into 2016, investors will be watching to see what
the drop in oil prices and potential weakness in the economy
mean for monetary policy, said Madhavji.
    "It's still all about divergent monetary policy between
Canada and the U.S., that's a theme that will be the key thing
as we head into next year," he said.
    "The economic data still matter but a lot of people have
priced in a neutral to muddy outlook for Canada the next one or
two quarters."
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 15
Canadian cents to yield 0.507 percent and the benchmark 10-year
 rising 20 Canadian cents to yield 1.414 percent.

 (Reporting by Leah Schnurr, Euan Rocha and John Tilak; Editing
by Chris Reese)