CANADA FX DEBT-C$ weakens, paring recent gains, as crude oil prices fall

Thu Mar 10, 2016 5:19pm EST
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(Adds analyst quotes, details on Wall Street, updates prices)
    * Canadian dollar at C$1.3346, or 74.93 U.S. cents
    * Bond prices fall across the maturity curve
    * 10-year yield touches highest level in nearly seven weeks

    By Fergal Smith
    TORONTO, March 10 (Reuters) - The Canadian dollar fell
against its U.S. counterpart on Thursday as lower oil prices
weighed on the commodity-related currency amid broad market
volatility a day after it hit a nearly four-month high.
    The currency fell against a broadly weaker greenback as
prices for oil, a major Canadian export, slid from a three-month
high on doubts that producing countries could reach agreement to
limit supply. 
    The loonie, as Canada's currency is colloquially known, had
touched its strongest since Nov. 12 at C$1.3230 on Wednesday
after the Bank of Canada held its policy interest rate steady at
0.50 percent and refrained from action to erode the currency's
recent sharp gains. 
    "Yesterday's move was overextended," said Stuart Rotman, a
foreign exchange risk manager at Velocity Trade.
    "It was somewhat bizarre that the Canadian dollar would move
that much stronger on really no news," he added.
    U.S. crude prices settled at $37.84 a barrel, down
1.18 percent, although paring earlier losses in volatile
    Wall Street reversed course and slipped into the red after
European Central Bank President Mario Draghi signaled an end to
further rate cuts. Earlier in the session, the ECB had unveiled
a raft of measures to stimulate growth.  
    The Canadian dollar ended at C$1.3346 to the
greenback, or 74.93 U.S. cents, weaker than Wednesday's close of
C$1.3250, or 75.47 U.S. cents.
    The currency's strongest level of the session was C$1.3836,
while its weakest was C$1.3941.
    Canada's employment report due on Friday is expected to show
the economy added 9,000 jobs in February after losing more than
5,000 the month before. 
    Markets are also awaiting the March 22 federal budget. The
new Liberal government is expected to run a big deficit and
invest in infrastructure projects, while adding private-sector
investment to projects could spur even greater spending.
    An assessment of expected government measures will be
incorporated into the Bank of Canada's economic projection in
    Canadian government bond prices were lower across the
maturity curve in sympathy with U.S. Treasuries and German
    The two-year price fell 7.5 Canadian cents to
yield 0.566 percent and the benchmark 10-year was
down 47 Canadian cents to yield 1.299 percent. The 10-year yield
touched its highest since Jan. 22 at 1.336 percent.
    In domestic data, industrial production capacity fell 0.5
percentage points to 81.1 percent in the fourth quarter, while
new home prices rose 0.1 percent in January. 

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and Diane