CANADA FX DEBT-C$ weaker as 4-year low in oil price weighs

Thu Nov 13, 2014 4:25pm EST
 
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* Canadian dollar at C$1.1376 or 87.90 U.S. cents
    * Bond prices higher across maturity curve

 (Adds comment, updates prices to close)
    By Alastair Sharp
    TORONTO, Nov 13 (Reuters) - The Canadian dollar lost ground
against its U.S. counterpart on Thursday, as a weak oil price
blunted enthusiasm for the commodity-linked currency.
    Oil prices fell about 3 percent on Thursday to four-year
lows after U.S. data showed stockpiles surged, a day after top
producer Saudi Arabia raised fears it would not agree to output
cuts later this month. 
    "It's all crude-related," said David Bradley, director of
currency trading at Scotiabank. "The correlation hasn't been
overly strong between crude and the Canadian dollar over the
last 12 months or so, but it seems to be reacting to it now."
    Bradley said even if crude prices stabilize, the loonie - as
Canada's currency is colloquially known - would likely weaken
further given Canadian interest rates are expected to stay on
hold longer than U.S. rates.
    "I can't imagine seeing crude with a $60 handle on it and
staying there for very long, whereas it's our view that
dollar/Canada can continue higher regardless of what crude is
doing," he said.
    The loonie has settled into a tighter range after weakening
last week was halted by strong domestic employment data and
mixed U.S. jobs data on Friday.
    "The oscillation between C$1.13 and C$1.14 since the payroll
numbers has really been in play ... there were no legs to take
dollar/Canada below C$1.1280," said Jack Spitz, managing
director of foreign exchange at National Bank Financial.
    Spitz said "the directional bias by most traders is to buy
the dips" on weak oil prices, a major Canadian export.
    The Canadian dollar ended the North American
session at C$1.1376 to the greenback, or 87.90 U.S. cents,
weaker than Wednesday's close of C$1.1316, or 88.37 U.S. cents.
    Legislation to approve the controversial Keystone XL oil
pipeline began racing through the U.S. Congress on Wednesday,
eventual approval of which could boost the loonie.
 
    "Any positive changes with respect to improving the
efficiency of oil flow from Canada to the U.S. are likely to be
seen as a positive for the Canadian dollar," Spitz said.
    Canadian government bond prices rose across the maturity
curve, with the two-year up 1.5 Canadian cents to
yield 1.008 percent and the benchmark 10-year bond 
gaining 15 Canadian cents to yield 2.044 percent.

 (Reporting by Alastair Sharp, editing by G Crosse)