CANADA FX DEBT-C$ weakens to a nearly one-week low as oil prices fall

Tue Mar 15, 2016 4:35pm EDT
 
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* Canadian dollar at C$1.3362, or 74.84 U.S. cents
    * Bond prices higher across a flatter maturity curve

 (New throughout, updates prices and market activity)
    TORONTO/OTTAWA, March 15 (Reuters) - The Canadian dollar
weakened against the greenback on Tuesday, hitting a nearly
one-week low as crude oil prices fell and investors braced for a
policy decision from the U.S. Federal Reserve on Wednesday.
    Oil prices slid for a second day. 
    U.S. crude prices settled down 84 cents at $36.34 a
barrel. Global risk aversion added to the headwinds for the
commodity-related currency after the Bank of Japan painted a
bleaker picture of the Japanese economy. 
    "We're really continuing to see a tight correlation between
the Canadian dollar and oil," said Scott Smith, senior market
analyst at Cambridge Global Payments in Toronto.
    The Canadian dollar ended the North American
trading session at C$1.3362 to the greenback, or 74.84 U.S.
cents, weaker than Monday's close of C$1.3267, or 75.37 U.S.
cents.
    The decline brought the loonie further away from the
four-month high it hit at the end of last week.
    Focus was also turning to the two-day Fed policy meeting
that began on Tuesday. Investors were preparing for a hawkish
tone from the statement on Wednesday, which could boost the U.S.
dollar to the detriment of the loonie. 
    "(Stronger) inflation expectations, better-than-expected
economic data and a calming of the international marketplace
really alleviate some of the concerns the Fed had about the
previous tightening in December," said Smith.
    "While I don't think they will raise rates tomorrow, I think
what we're going to be able to see is a more hawkish Fed."
    Domestic data was mixed. Sales of existing homes rose 0.8
percent in February from the prior month, a report from the
Canadian Real Estate Association showed. Data from PayNet showed
that commercial borrowing by small businesses dipped at the
start of 2016 as the economy continued to feel the pain from the
downturn in energy prices.     
    Canadian government bond prices rose across the maturity
curve, with the two-year price up 1 Canadian cent to
yield 0.574 percent and the benchmark 10-year rising
16 Canadian cents to yield 1.328 percent.

 (Reporting by Fergal Smith and Leah Schnurr; Editing by David
Gregorio)