April 19, 2017 / 8:42 PM / 3 months ago

CANADA FX DEBT-C$ sinks to one-month low as oil prices slump

3 Min Read

 (Adds economist comment, updates prices to close)
    * Canadian dollar settles at C$1.3480, or 74.18 U.S. cents
    * Loonie's close its weakest since March 14
    * Bond prices fall across maturity curve

    By Alastair Sharp
    TORONTO, April 19 (Reuters) - The Canadian dollar extended
losses against its U.S. counterpart on Wednesday, hitting its
weakest level in more than a month as prices for oil, a major
Canadian export, fell sharply.
    The slide in the value of the loonie came as oil settled
almost 4 percent lower, with a surprising build in U.S. gasoline
inventories and rising U.S. crude output undercutting efforts by
other countries to reduce a global glut.      
    The Canadian dollar          settled at C$1.3480 to the
greenback, or 74.18 U.S. cents, much weaker than the Bank of
Canada's Tuesday close of C$1.3381, or 74.73 U.S. cents.
    The move, which added to a sharp fall in the previous
session, handed the loonie its weakest close since March 14.
    But the move to the weak end of the C$1.30-C$1.36 range the
currency has traded in since September does not point to a
fundamental shift in its standing, according to one economist.
    "Assuming oil doesn't fall two bucks a day for the next two
weeks I think we'll stay in that range," said Benjamin Reitzes,
senior economist at BMO Capital Markets.  
    "There's no reason to believe the Canadian dollar is going
to weaken materially from here" absent a sustained sharp oil
price fall, he said, pointing out the rate spreads against U.S
bonds have moved in Canada's favor recently and that the outlook
for the domestic economy is much better than it was when the
currency was last at similar levels in November and December.   
    Canadian government bond prices were lower across the
maturity curve, with the price of the two-year            down
1.5 Canadian cents to yield 0.706 percent and the benchmark
10-year             fell 30 Canadian cents to yield 1.465
percent.

 (Reporting by Alastair Sharp; Editing by Paul Simao and Lisa
Shumaker)
  
 

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