CANADA FX DEBT-Canada dollar drops to over 5-yr low on oil's slide

Tue Nov 4, 2014 4:55pm EST
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* Canadian dollar at C$1.1410 or 87.64 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    OTTAWA, Nov 4 (Reuters) - The Canadian dollar fell to a more
than five-year low against the greenback on Tuesday, piercing
the C$1.14 level on a drop in oil prices and dovish comments
from the Bank of Canada.
    Data that showed Canada had an unexpected trade surplus in
September helped the loonie retrace some of its decline, pulling
it back from a session low touched just before the trade figures
were released. 
    Still, the Canadian dollar was hit hard by the sharp drop in
oil prices after Saudi Arabia cut sales prices to the United
States. U.S. crude settled down $1.59 at $77.19 a barrel.
    It's "the general consensus from the market that Canada is
linked to oil and oil has been tumbling, so that's what's led to
the decline in the value of the loonie," said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    The loonie was also pressured by comments from the head of
the Bank of Canada, who said the central bank will continue with
monetary stimulus despite risks from high household debt and a
hot housing market. 
    The remarks by bank Governor Stephen Poloz and Senior Deputy
Governor Carolyn Wilkins before the House of Commons finance
committee added to the dovish tone policymakers have struck this
week. Poloz said on Monday the risks from a new downturn in the
economy and inflation are less easy to handle that upside
    "For loonie traders, they were a little bit taken aback
about how dovish Bank of Canada Governor Poloz and Wilkins have
been. I don't think that can really be understated," said Amo
Sahota, director at Klarity FX in San Francisco.
    The Canadian dollar ended the North American
session at C$1.1410 to the greenback, or 87.64 U.S. cents,
weaker than Monday's close of C$1.1357, or 88.05 U.S. cents.
    Risk appetite in the markets was also dampened after the
European Commission cut its forecasts for the euro zone's
economy and said the region would need another year to reach
even a modest level of economic growth. 
    The Canadian currency touched a session low of C$1.1429
against the U.S. dollar in morning trade, its lowest level since
July 2009.
    Technically the currency pair faces resistance around
C$1.1440, Sahota said.
    "If it doesn't hold and the market rallies above, then I
think there will be some fresh Canadian dollar shorts in the
marketplace joining in and we could get yet another
acceleration," he said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 0.985 percent and the benchmark 10-year
 up 15 Canadian cents to yield 2.026 percent.

 (Editing by Peter Galloway)