CANADA FX DEBT-C$ weakens with oil price as greenback rally restarts

Mon Nov 10, 2014 4:56pm EST
 
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* Canadian dollar at C$1.1374 or 87.92 U.S. cents
    * Bond prices lower across the maturity curve

 (Adds strategist's comment, updates prices to close)
    By Alastair Sharp
    TORONTO, Nov 10 (Reuters) - The Canadian dollar slipped
against the greenback on Monday as oil prices fell and the U.S.
dollar resumed its recent rally against a range of currencies.
    The loonie, as Canada's currency is colloquially known, had
been falling hard recently against the U.S. dollar, but it
jumped on Friday on a surprisingly robust domestic jobs report
coupled with slightly weaker-than-expected U.S. employment
numbers.
    It reverted to the downward trend again on Monday, however,
ending the session at C$1.1374 to the greenback, or 87.92 U.S.
cents, weaker than Friday's close of C$1.1333, or 88.24 U.S.
cents.
    Greg Moore, senior currency strategist at Royal Bank of
Canada, forecasts the loonie will drop to as low as C$1.18 to
the greenback and said there is a risk it could fall even
further given weak prices for oil, a major Canadian export.
    "What's changed from a fundamental point of view is this
substantial move lower in oil prices, which, if it is in fact
sustainable, does pose an even greater threat to the Canadian
dollar against the U.S. dollar," Moore said.
    The price of oil has fallen steadily since mid-2014 due to
excess supply and subdued demand, with the Canadian dollar
following it lower. 
    In the same period, the U.S. dollar has climbed versus most
major currencies as more hawkish-looking U.S. central bankers
have expressed increasing confidence in economic recovery.
    "We could be entering a period of rest here where several
currencies and several asset classes have made really large
moves and now it's time to catch your breath and rethink where
things should be valued," said Camilla Sutton, chief currency
strategist at Scotiabank. 
    "But certainly that fall in oil prices is a material shift
for the Canadian dollar," she said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 3.5 Canadian
cents to yield 1.036 percent and the benchmark 10-year
 down 30 Canadian cents to yield 2.059 percent.

 (Editing by Peter Galloway)