CANADA FX DEBT-C$ falls to 5-1/2 year low as oil keeps falling

Mon Jan 12, 2015 4:47pm EST
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(Updates with fresh comment, closing figures.)
    * Canadian dollar at C$1.1967 or 83.56 U.S. cents
    * Oil prices continue to slide, U.S. dollar strong
    * Bond prices higher, 10-year yield lowest since mid-2012

    By Andrea Hopkins
    TORONTO, Jan 12 (Reuters) - The Canadian dollar hit a fresh
5-1/2 year low against the greenback on Monday as oil prices
continued to tumble, pushing the currency towards a key
psychological support level at C$1.20 to the U.S. dollar.
    Oil is a major Canadian export and crude prices showed no
sign of escaping their downward spiral. Meanwhile, the U.S.
dollar edged higher as investors expecting a stronger greenback
reloaded after it weakened on Friday on data which showed a
surprise fall in U.S. wages in December. 
    Crude prices fell 5 percent to their lowest in nearly six
years, extending the second-deepest rout on record after Goldman
Sachs said prices would fall further and stay near $40 for most
of the first half of 2015, and Gulf producers showed no sign of
cutting output. U.S. crude settled at $46.07. 
    "It's a little bit shocking just the velocity of how quick
the loonie has dropped over the last couple of months," said
Rahim Madhavji, president at
    "For the loonie to stop its descent, oil's going to need to
stabilize first ... right now it really doesn't look good for
    The Canadian dollar finished at C$1.1967 to the
greenback, or 83.56 U.S. cents. That was much weaker than
Friday's finish of C$1.1866, or 84.27 U.S. cents, and the
currency's lowest point since May 2009. It was at around C$1.16
at the start of 2015, and at C$1.06 in mid-2014.
    Scotiabank's chief currency strategist Camilla Sutton said
analysts were looking to C$1.20 as a key level where the
Canadian dollar could find support. 
    "We're now talking about whole numbers and C$1.20 is the
next key level. It's a very important one because it is a big
psychological shift going from the teens up to C$1.20," she
    Market watchers are awaiting a Tuesday speech Bank of Canada
Deputy Governor Timothy Lane in which he's expected to provide
guidance on how oil prices are affecting Canada's economy. 
    "That's an important one because hopefully we'll get a
little bit more clarity on how the Bank of Canada is using new
oil prices in their modeling," Sutton said.
    Canadian government bond prices were higher across the
maturity curve. The two-year rose 4.5 Canadian cents
to yield 0.925 percent and the benchmark 10-year 
climbed 39 Canadian cents to yield 1.613 percent. That is its
lowest yield since mid-2012.

 (Additional reporting by Solarina Ho and Alastair Sharp;
Editing by Peter Galloway and Alan Crosby)