CANADA FX DEBT-C$ falls with oil; focus on rate decision

Mon Jan 19, 2009 4:54pm EST
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* C$ eases ahead of Tuesday's Bank of Canada rate decision

* Oil drops below $35 a barrel as supply worries fade

* Bonds lower ahead of interest rate announcement

By Jennifer Kwan

TORONTO, Jan 19 (Reuters) - The Canadian dollar edged lower against the U.S. currency on Monday as the price of oil, a key Canadian export, dropped below $35, and the market braced for the Bank of Canada's interest rate decision on Tuesday.

Canadian government bond prices were lower across the board on supply concerns.

The Canadian currency finished at C$1.2547 to the U.S. dollar, or 79.70 U.S. cents, down from C$1.2480 to the U.S. dollar, or 80.13 U.S. cents, on Friday, with market activity subdued because U.S. markets were closed for Martin Luther King Jr. Day.

"I characterize it as a fairly steady currency with the U.S. out on a holiday, sort of resulting in thinner markets," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

"With respect to Canada, generally, we're just awaiting for the Bank of Canada (rate) announcement tomorrow. A 50 basis point cut is widely expected, but markets are poised for a potentially more aggressive move and or suggestions in terms of whether future rate cuts can be expected."   Continued...