CANADA FX DEBT-C$ weakens as oil prices drop

Tue Aug 12, 2014 9:51am EDT
 
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* Canadian dollar at C$1.0935 or 91.45 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Aug 12 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday, hurt by a drop in oil prices
to a nine-month low, while investors moved to the sidelines
following two back-to-back sessions of sharp moves.
    A lack of domestic economic data on the calendar this week
has left the currency searching for a significant catalyst and
is expected to keep the loonie range-bound. 
    The market was also monitoring the ongoing geopolitical
crises around the world that have caused risk sentiment to ebb
and flow. 
    "I think it's just the range-trading environment that I
believe we'll be contained to throughout this week with an
absence of tier-one economic data in North America," said    
Scott Smith, senior market analyst at Cambridge Mercantile Group
in Calgary.
    The Canadian dollar was at C$1.0935 to the
greenback, or 91.45 U.S. cents, weaker than Monday's close of
C$1.0919, or 91.58 U.S. cents.
    "Until something dramatically changes in terms of the
economic outlook between the U.S. and Canada, I think U.S.
dollar-Canadian dollar is still a buy on the dips," Smith said.
"That C$1.09 level will be pretty strong support going forward" 
    Brent crude touched a nine-month low on Tuesday as
steady supplies eased concerns over potential disruptions. Brent
was recently down $1.21 at $103.47 a barrel, while U.S. crude
 lost 88 U.S. cents to $97.20 a barrel.
    As an exporter of oil and other natural resources, the
Canadian dollar can be sensitive to commodity prices.
    The Canadian dollar is down 1.7 percent since the beginning
of July, erasing a rally in June, as optimism over the U.S.
economy has pushed investors into the greenback.
    While the loonie could consolidate in the near term, most
analysts expect it will ultimately weaken further with C$1.10
the next level to watch.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.059 percent and the benchmark 10-year up
7 Canadian cents to yield 2.069 percent.

 (Editing by Peter Galloway)