CANADA FX DEBT-C$ weakens to 5-week low as oil and stocks fall

Tue Sep 13, 2016 5:00pm EDT
 
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* Canadian dollar ends at 1.3170, or 75.93 U.S. cents
    * Loonie touches its weakest since Aug. 9 at C$1.3190
    * Canadian bond prices lower across steeper maturity curve
    * 10-year yield touches its highest in more than two months

    By Fergal Smith
    TORONTO, Sept 13 (Reuters) - The Canadian dollar fell on
Tuesday, touching its weakest level in five weeks against its
U.S. counterpart as a drop in stock and commodity markets
weighed on the risk-sensitive commodity-linked currency.
    World stock markets and energy prices fell after energy
producers and consumers predicted an oil glut was likely to
persist well into next year. 
    U.S. crude prices settled $1.39 lower at $44.90 a
barrel. 
    A capitulation of investor bets that reach for yield added
to pressure on higher yielding commodity currencies, such as the
Canadian dollar, said Mazen Issa, senior fx strategist at TD
Securities.
    The commodity-linked Canadian dollar ended at
C$1.3170 to the greenback, or 75.93 U.S. cents, much weaker than
the Bank of Canada's official close on Monday of C$1.3049, or
76.63 U.S. cents.
    The currency's strongest level of the session was C$1.3030,
while it touched its weakest since Aug. 9 at C$1.3190.
    The Canadian dollar underperformed many major currencies,
although it gained against fellow commodity currencies, the
Australian and New Zealand dollars, as well as some emerging
market currencies, such as the Brazilian real and the Mexican
peso.
    Canada can lead the process of global economic recovery by
setting standards for other countries to aspire to, the
International Monetary Fund's Managing Director Christine
Lagarde said. 
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
 price fell 2.5 Canadian cents to yield 0.599 percent
and the benchmark 10-year declined 68 Canadian cents
to yield 1.229 percent.
    The 10-year yield touched its highest since June 23 at 1.250
percent.
    The U.S. dollar was broadly higher, recovering ground
lost in the previous session following a speech by Federal
Reserve policymaker Lael Brainard that solidified the view that
U.S. interest rates are unlikely to rise this month.
 
    Bank of Canada Senior Deputy Governor Carolyn Wilkins will
speak on Wednesday. After the Bank of Canada struck a dovish
tone in its most recent policy statement, investors will look
for insight into how the central bank now sees the Canadian
economy faring in the second half of the year.

 (Reporting by Alastair Sharp; Editing by Nick Zieminski and
David Gregorio)