CANADA FX DEBT-C$ sinks with oil, bonds turn lower

Fri Dec 12, 2008 5:02pm EST
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* Canadian dollar falls, underperforms on the crosses

* Auto industry in Canada and United States in focus

* Bonds flat to lower as stocks turn higher

TORONTO, Dec 12 (Reuters) - The Canadian dollar fell against the U.S. dollar on Friday, and dropped sharply versus the euro, as oil prices retreated and the survival of the North American auto industry was put in question.

Canadian bond prices were flat to lower as a rebound in stock markets erased early gains made in the bond market on shaky U.S. retail sales data.

The Canadian dollar finished at C$1.2512 to the U.S. dollar, or 79.92 U.S. cents, down from C$1.2337 to the U.S. dollar, or 81.06 U.S. cents, at Thursday's close when it shot up 2 U.S. cents.

The Canadian currency fell early in the day alongside the price of oil and trimmed losses as oil recovered a bit as the day progressed. The currency generally moves with the price of oil because Canada is a major oil exporter.

"I suppose it's the classic reversal in oil prices that's doing part of it. It looks like commodity players in general are being unfavorably viewed today," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"But the U.S. dollar is hardly a bastion of strength in its own right."   Continued...