CANADA FX DEBT-C$ closes below 70 U.S. cents for first time since April 2003

Wed Jan 13, 2016 5:49pm EST
 
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(Adds analyst, prime minister's comments; updates prices)
    * Canadian dollar at C$1.4345 or 69.71 U.S. cents
    * Closes below 70 U.S. cents for first time since April 2003
    * Bond prices rise across the maturity curve
    * Canada-U.S. 2-year spread trades at tightest since March
2007

    By Fergal Smith
    TORONTO, Jan 13 (Reuters) - The Canadian dollar fell to a
fresh 12-year low against its U.S. counterpart on Wednesday,
closing below the 70 U.S. cents threshold, as a sell-off in
stocks weighed on the risk-sensitive commodity currency and
crude oil prices remained fragile.
    The loonie, as Canada's currency is colloquially known,
reversed course after positive Chinese trade data helped support
sentiment earlier in the day. 
    "We had a relief rally based on relatively solid Chinese
data overnight, and that relief rally ran out of steam this
morning," said Karl Schamotta, director of foreign exchange risk
and strategy at Cambridge Global Payments. 
    The currency closed below the psychological 70 U.S. cents
threshold for the first time since April 2003. It briefly traded
below that level on Tuesday as speculation intensified that the
Bank of Canada will cut interest rates as early as next week.
    
    Brent crude ended 2 percent lower after falling below $30 a
barrel for the first time since April 2004 as growing stocks of
oil in the United States stoked market fears about demand.
 U.S. crude prices settled at $30.48 a
barrel, up 0.13 percent.
    The Canadian dollar ended at C$1.4345 to the
greenback, or 69.71 U.S. cents, weaker than the Bank of Canada's
official close on Tuesday of C$1.4257, or 70.14 U.S. cents.
    The currency's strongest level of the session was C$1.4188,
while it hit its weakest since April 2003 at C$1.4380.
    "Right now most traders are looking for the C$1.45 target
and I think momentum is going to carry us there, but beyond that
point there are a number of things that could come into play to
really put support under the Canadian dollar," said Schamotta.
    Adding to the negative backdrop for the currency, Canadian
home prices saw their first monthly fall in a year. 
    Canadian Prime Minister Justin Trudeau said his government
is watching the exchange rate fluctuations carefully.
 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 5 Canadian
cents to yield 0.313 percent and the benchmark 10-year
 rising 17 Canadian cents to yield 1.243 percent. It
left the 10-year yield within reach of the August record trough
at 1.189 percent. 
    The Canada-U.S. two-year bond spread was 1.6 basis points
more negative at -60.2 basis points, trading at its tightest
since March 2007, as Canadian government bonds outperformed.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and James
Dalgleish)