CANADA FX DEBT-C$ turns lower as oil prices hit 20-month low

Wed Nov 12, 2008 9:50am EST
 
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 * Canadian dollar hits lowest level since Oct. 31
 * Lower oil prices blamed for currency's latest slide
 * Bond prices all higher after Tuesday's stock selloff
 By Frank Pingue
 TORONTO, Nov 12 (Reuters) - The Canadian dollar was lower
versus the U.S. dollar on Wednesday as a sharp slide in the
price of oil, a key Canadian export, knocked the currency to
its lowest level in more than a week.
 Bond prices were higher across the curve as investors who
unloaded stocks on Tuesday, when bond markets were closed,
moved back into more secure government debt.
 At 9:25 a.m. (1425 GMT), the Canadian unit was at C$1.2135
to the U.S. dollar, or 82.41 U.S. cents, down from C$1.2050 to
the U.S. dollar, or 82.99 U.S. cents, at Tuesday's close.
 Familiar factors were weighing on the Canadian dollar early
in the session as oil prices fell to their lowest level in 20
months, while fears of a deep global recession persisted.
 "The overall trend is favoring a higher dollar Canada with
commodities selling off and risk aversion clearly dominating,"
said Matthew Strauss, senior currency strategist at RBC Capital
Markets. "Given that backdrop, it's difficult to see the
Canadian dollar rallying today."
 Signs that the global economic slump was deepening emerged
from Europe as the Bank of England forecast the British economy
will shrink sharply next year and inflation could fall to just
below 1 percent in two years, suggesting further interest rate
cuts to come.
 The continued worries about the state of the global economy
tend to prompt a move by traders into the greenback, which is
widely considered a secure currency during times of
uncertainty.
 Comments by Finance Minister Jim Flaherty, who said Canada
remains on track for a small surplus and that the government
will triple the amount of insured mortgages it will buy from
banks to help improve long-term credit did not have any
noticeable impact on the currency.
 BONDS PRICES RALLY
 Canadian bond prices rallied across the curve in a delayed
reaction by dealers who dumped stocks during Tuesday's session,
when bond markets in Canada and the United States were closed.
 Bond markets were closed on Tuesday for Remembrance Day in
Canada and for Veterans Day in the United States, forcing
dealers to wait until Wednesday to load on more more secure
debt.
 With no economic data due out in Canada on Wednesday, bond
prices will likely be dictated by movements in North American
stock markets, which could be in for another back-and-forth
session given fears about a deep economic slump.
 The two-year bond was up 7 Canadian cents at C$101.72 to
yield 1.889 percent. The 10-year bond was up 44 Canadian cents
at C$104.67 to yield 3.665 percent.
 The yield spread between the two- and 10-year bond was 182
basis points, up from 179 basis points at the previous close.
 The 30-year bond rallied 50 Canadian cents to C$113.05 to
yield 4.210 percent. In the United States, the 30-year Treasury
yielded 4.160 percent.
 (Editing by Peter Galloway)
 For Reuters bond and money market pricing information
double click on one of the following:
 CAD=      Canadian dollar live quote, high/low
  FXNEWS  Headlines from global forex markets
 CDBN      Canadian bond prices
 CDMM CDMN <0#CAMMKT=> Canadian money market prices
 CABONEA   Canada-U.S. spreads (live)
 YLDS1     World yield index
 CA30YT=RR 30 year benchmark
 <0#CGB:> CGBc1 <CA/FACTOR1> MEIRP - Montreal Exchange
bond futures pricing information
 CAMCI=    Bank of Canada monetary conditions index (Reuters
calculation)
 CACALL=   Canada's call loan or overnight lending rate
For the fixed-income market speed guides, double click on
one of the following:
  <CA/MMKT1> <CA/MMKT2> <CA/DEBT> BONDS TREASURY For
related news, double click on one of the following:
 [CAN]  Canadian news
 [NAT]  North American Treasuries news
 [M]    Money news
 [D]    Debt news
 [MF]   Markets news
 [GVD]  Government debt news
 [MMT]  Money market news
 [INT]  Interest rate news
 [CEN]  Central bank news
 [CA/]  Canadian bond market stories