CANADA FX DEBT-C$ edges down as oil fluctuates, bonds mixed
* C$ eases to $1.0279 as U.S. crude trims gains
* Bond prices mixed as equities fall, supply coming
* Canada January building permits fall unexpectedly (Adds details)
TORONTO, March 7 (Reuters) - Canada's dollar CAD=D4 finished lower against the greenback on Monday, buffeted by volatile oil prices, which fluctuated with violence in Libya and on concerns about supply disruptions.
U.S. crude futures CLc1, an influential factor for the commodity-linked Canadian dollar, ended higher, though paring some gains after reaching their highest level since September 2008. But Brent crude oil futures ended lower. [ID:nL3E7E700D]
The Canadian dollar managed to limit losses, finishing at C$0.9729 to the U.S. dollar, or $1.0279, down from Friday's North American session close at C$0.9717 to the U.S. dollar, or $1.0291.
The currency stayed in a moderate range of C$0.97-C$0.9743, similar to the last seven sessions, which have seen the currency locked in a C$0.97-C$0.98 band.
"We've had a shift in markets over the day. It started off very positive and everything's turned negative as the day wore through. We've had a pretty tight range over the last few sessions here," said Camilla Sutton, chief currency strategist at Scotia Capital.
"(Dollar/Canada) hasn't really been able to move lower, but it's not really moving substantially above. It just highlights that it's waiting for a catalyst, and that's likely to be oil."
Oil was the leading factor that pressured equity markets, as worries mounted about the stifling effect of higher oil prices, which are now above $100 a barrel. Major North American indexes were down more than 1 percent at one point on Monday.
Sutton noted the correlation between U.S. oil prices and the Canadian dollar has strengthened once again, particularly on a rolling 30-day basis, with factors such as the euro, interest rate spreads, and equities lagging oil.
Canadian government bonds were mildly mixed with equities on the decline and tracked U.S. Treasuries, which fell on upcoming $66 billion in new supply this week.
The two-year bond CA2YT=RR was unchanged to yield of 1.853 percent, while the five year bond eked out a 1 Canadian cent gain to yield 2.763 percent. The 10-year bond CA10YT=RR edged down 10 Canadian cents to yield 3.350 percent.
HOUSING, JOBS DATA AHEAD
Several pieces of data this week will help determine the strength of the domestic economic recovery and market pricing on the Bank of Canada's next interest rate hike.
"We're waiting for some sort of catalyst to kick us out of this current range that we're in (where) C$0.97 is looking to be pretty good (U.S. dollar) support. It's going to be data-driven." said Brendan McGrath, senior foreign exchange trader at Western Union Business Solutions, in Victoria, British Columbia.
Housing starts, due on Tuesday, could show whether the sector continues to be a drag on overall growth after being a main factor pulling the economy from recession.
Trade data for January on Thursday, as well as the February reading on the jobs market on Friday, will be the main attractions this week as market players look to see whether both pieces of data can repeat the unexpected strength from their previous months.
But if any of the data is weaker, the Canadian dollar may follow suit and weigh on anticipation of an interest rate hike before midyear, analysts said.
The central bank has stayed on the sidelines since September after three consecutive rate increases last year brought its benchmark rate to a still-low 1 percent.
Overnight index swaps, which trade based on expectations for the key central bank rate, imply a fully priced-in rate increase on the bank's Sept. 7 decision date. BOCWATCH (Reporting by Ka Yan Ng; editing by Rob Wilson)
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