CANADA FX DEBT-C$ falls as crude oil prices, stock market losses weigh

Tue Feb 2, 2016 9:31am EST
 
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* Canadian dollar at C$1.4080 or 71.02 U.S. cents
    * Currency pulls back from a nearly four-week high on Monday
    * Bond prices higher across the maturity curve on flight to
safety

    TORONTO, Feb 2 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday, pulling back from a
nearly four-week high as lower crude oil prices and stock market
losses weighed on the risk-sensitive commodity currency.
    Oil prices  fell more than 4 percent on
Tuesday, extending their decline on Monday, as hopes for a deal
between OPEC and Russia on output cuts faded. 
    World stocks dipped after a three-day run of gains as the 
drop in oil prices sparked renewed nerves. 
    Fellow commodity currency the Australian dollar also fell
after the Reserve Bank of Australia left rates on hold at 2
percent, but left the door open to further easing.
  
    At 9:12 a.m. EST (1412 GMT), the Canadian dollar 
was trading at C$1.4080 to the greenback, or 71.02 U.S. cents,
much weaker than Monday's official close of C$1.3930, or 71.79
U.S. cents.
    The currency's strongest level of the session was C$1.3940,
while C$1.4080 was its weakest. The currency touched on Monday
its strongest since Jan. 5 at C$1.3908.     
    Renewed pressure on crude oil prices has left the market
fully discounting a July interest rate cut from the Bank of
Canada after implying a 90 percent probability on Monday.
 
    Nonetheless, the Canadian dollar has rallied more than 4
percent since hitting on Jan. 20 its weakest since 2003 at
C$1.4689.
    Canadian government bond prices were higher across the
maturity curve on the flight to safety. The two-year 
price was up 6.5 Canadian cents to yield 0.387 percent and the
benchmark 10-year rose 54 Canadian cents to yield
1.171 percent.
    The curve flattened, as the spread between the 2-year and
10-year yields narrowed by 2.5 basis points to 78.4 basis
points, indicating outperformance for longer-dated maturities.
    The Canada-U.S. 10-year spread was 0.7 of a basis point less
negative at -72.9 basis points as Treasuries outperformed.
    Canadian employment data for January and trade data for
December are due on Friday. 

 (Reporting by Fergal Smith Editing by W Simon)