CANADA FX DEBT-C$ higher vs US$, other commodity currencies even as oil falls
(Adds strategist comment, details; updates prices to close) * Canadian dollar ends at C$1.3879, or 72.05 U.S. cents * Bond prices mixed across the maturity curve * Canada 10-year yield hits record low at 1.008 percent By Alastair Sharp TORONTO, Feb 9 (Reuters) - The Canadian dollar firmed against a broadly weaker U.S. counterpart on Tuesday even as oil prices tumbled, although it lost ground against safe-haven currencies including the Japanese yen and the Swiss franc amid turmoil in equities worldwide. The Canadian currency did better than a string of other commodity-linked currencies as oil teetered close to a 12-1/2-year low hit last month and financial turbulence fed doubts about the Federal Reserve's forecast of four U.S. interest rate hikes this year. "The Canadian dollar is standing there in splendid isolation relative to that group" of commodity currencies that include the Russian rouble, Mexican peso and Norwegian crown, said Shaun Osborne, chief currency strategist at Scotiabank. "It may well be that people were just getting too negative on Canada," he said. The Canadian dollar settled at C$1.3879 to the greenback, or 72.05 U.S. cents, stronger than the Bank of Canada's official Monday close of C$1.3934, or 71.77 U.S. cents. U.S. crude prices settled down 5.9 percent at $27.94 a barrel while Brent lost 6.6 percent to $30.72 on gloomy U.S. and global demand outlooks. Osborne said decent Canadian economic data since early January, including on wholesale trade, retail sales and manufacturing, have helped reverse loonie weakness that saw the currency approach C$1.47 versus the greenback in mid-January. Losses in Asian stock markets sent investors scurrying for safe havens, while a drop in bank shares kept European shares under pressure. Yields on longer-term Japanese bonds fell below zero for the first time. The U.S. dollar fell to its lowest in more than three months against a basket of major currencies, weighed by losses for equity markets and oil and doubts about the Fed's rate-hike trajectory. Fed Chair Janet Yellen is due to give testimony on Wednesday. Canadian government bond prices were mixed across the maturity curve, with the two-year price up 2 Canadian cents to yield 0.354 percent and the benchmark 10-year flat to yield 1.051 percent after hitting a record low at 1.008 percent. Longer-dated bond prices rose. Scotia's Osborne said the next likely catalyst for the currency would be the federal budget, given the potential for significant stimulus spending to boost economic growth and lower the risk of the Bank of Canada cutting rates. Canada's new Liberal government is set to unveil its first budget in the week of March 21, two sources with knowledge of the process said on Tuesday. (Additional reporting by Fergal Smith; Editing by W Simon and James Dalgleish)
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