CANADA FX DEBT-C$ weakens on rate speculation, oil's slide

Mon Jan 12, 2009 5:01pm EST
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* C$ hits lowest close in a week as oil below $38 a barrel

* Bonds higher as Toronto stocks selloff 3.2 percent

* BoC surveys show worse credit conditions, glum sentiment

By Jennifer Kwan

TORONTO, Jan 12 (Reuters) - The Canadian dollar finished at its lowest level in a week against the U.S. currency on Monday as two Bank of Canada reports were seen as increasing the chances of another big interest rate cut and the price of oil fell below $38 a barrel.

The Canadian currency closed at C$1.2154 to the U.S. dollar, or 82.28 U.S. cents, down from C$1.1908 to the U.S. dollar, or 83.98 U.S. cents, on Friday.

Bond prices were higher as money flowed from riskier assets with Toronto's main stock index .GSPTSE closing down 3.2 percent.

Two surveys from the Bank of Canada helped sour the market mood, showing lending conditions in the country worsened considerably in the fourth quarter and that overall business sentiment is at its lowest point in at least a decade. [ID:nN12332202]

"It does appear the recession in Canada is deepening, credit conditions are tightening to extreme levels, and that sort of builds the case, potentially, for the Bank of Canada to perhaps ease (interest rates) even more aggressively," said Michael Gregory, senior economist at BMO Capital Markets.   Continued...