CANADA FX DEBT-C$ sees worst day in 9 mths on oil, global growth fears

Tue May 3, 2016 5:05pm EDT
 
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* Canadian dollar at C$1.2713, or 78.66 U.S. cents
    * Bond prices higher across flatter maturity curve

 (Adds details, quote, updates prices)
    TORONTO/OTTAWA, May 3 (Reuters) - The Canadian dollar had
its biggest daily decline in more than nine months on Tuesday,
sliding against the greenback alongside energy prices and stock
markets worldwide as weak Chinese economic data raised worries
about the global economy.
    The more than 1 percent drop came after the Canadian dollar
touched its highest level in 10 months during overnight trading.
The loonie has been on a tear since late January and has gained
more than 14 percent since then.
    The Canadian dollar also suffered from strength in the U.S.
dollar against a basket of currencies, as well as an
interest rate cut from the Bank of Australia on concerns about
deflation. Canada and Australia are often seen as having
parallel resource-based economies. 
    "That certainly fed on some of the fears about commodity
countries and initially got the Canadian dollar to weaken.
Weaker oil prices didn't help," said Mark Chandler, head of
Canadian fixed income and currency strategy at Royal Bank of
Canada.
    Despite the knee-jerk market reaction, concerns of deflation
in Canada are misplaced as core inflation has been relatively
strong around 2 percent, said Chandler.
    The Canadian dollar ended the North American
session at C$1.2713 to the greenback, or 78.66 U.S. cents,
weaker than Monday's close of C$1.2536, or 79.77 U.S. cents.
    In Canadian dollar terms, the currency lost 1.4 percent, its
biggest loss since July 15 when the Bank of Canada cut rates for
a second time last year. 
    Oil fell for a second day as rising output from the Middle
East and North Sea renewed concerns about global oversupply.
U.S. crude ended down $1.13 at $43.65 a barrel. 
    European and U.S. stock markets fell after data showed
activity at China's factories shrank for the 14th month in a row
in April. 
    Canadian bond prices were higher across the curve, with the
two-year up 9.5 Canadian cents to yield 0.643 percent
and the benchmark 10-year up 75 Canadian cents to
yield 1.457 percent.
    Canada's trade report for March is awaited on Wednesday,
while the nation's April employment report is due on Friday.
 

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