CANADA FX DEBT-C$ gains for session vanish as oil price slides

Wed Mar 11, 2009 1:53pm EDT
 
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* C$ reverses direction, wipes out session gains

* Slide in oil price primary source of weakness

* Bearish economic reports also seen as negative

TORONTO, March 11 (Reuters) - The Canadian dollar wiped out early gains against the U.S. currency to trade flat on Wednesday, hurt by weaker oil prices and data suggesting the economy is still in for a rough ride.

At 1:45 p.m. (1745 GMT), the Canadian currency was at C$1.2852 to the U.S. dollar, or 77.81 U.S. cents, unchanged from Tuesday's close.

Earlier in the session the currency rallied as high as C$1.2751 as growing risk appetite saw a range of currencies strengthen against the greenback, which is typically viewed as a safe haven.

But the Canadian unit sold off as oil, a major Canadian export, fell 5 percent to below $44 on Wednesday on further signs of weak global demand and rising inventories in the United States, the top consumer. [ID:nSP383602]

"The fact that we've seen oil prices softening today is contributing," said Eric Lascelles, chief economics and rates strategist with TD Securities.

He also cited "reports that we're getting out from the IMF and parliamentary budget office as well. They've all had their own particular angle, but the bottom line is still that the Canadian economy is in some pretty grim shape."

The International Monetary Fund said Canada is in for even tougher economic times in the near future because of its reliance on international trade, particularly with the United States. [ID:nTOD004024]

Separately, Canada's parliamentary budget officer said the country's economic performance in the fourth quarter of 2008 was actually much worse than suggested by a 3.4 percent decline in gross domestic product. [ID:nN11276401] (Reporting by Jeffrey Hodgson; Editing by Peter Galloway)