CANADA FX DEBT-C$ hits weakest level in nearly six years after Fed
(Adds final figures, comments and details) * Canadian dollar at C$1.2611 or 79.30 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, Jan 29 (Reuters) - The Canadian dollar weakened to levels not seen in nearly six years against its U.S. counterpart on Thursday, extending losses from the previous session after the Federal Reserve maintained its view that U.S. interest rates could rise this year. A combination of cheap crude prices and diverging monetary policies between the Fed and the Bank of Canada, sharply illustrated by last week's shock rate cut in Canada and the Fed's upbeat outlook on Wednesday, have pushed the Canadian dollar firmly onto a weaker path. "There's a lot of talk about the Bank of Canada lowering rates again, especially if crude continues to trade as softly as it is," said David Bradley, director of foreign exchange trading at Scotiabank, adding that another rate cut could push the currency to C$1.30. "(Bank of Canada Governor Stephen) Poloz basically said after the last cut that they've still got lots of tricks up their sleeves should they need to act further on the back of domestic economic weakness." Poloz called the bank's stimulative move last week "insurance" against the impact of low crude prices on Canada, a major oil producer, and markets are now pricing in about a 57 percent probability of another rate cut in March. The Canadian dollar ended at C$1.2611 to the greenback, or 79.30 U.S. cents, nearly a cent weaker than Wednesday's close of C$1.2520, or 79.87 U.S. cents, and its weakest finish since the March 31, 2009. At one point in the session, the currency tumbled to C$1.2678, or 78.88 U.S. cents, its weakest intraday level since April 1, 2009. The benchmark U.S. oil price ended marginally higher on Thursday, but earlier in the day it fell below $44 a barrel for the first time since April 2009. "We're still well below $50 (barrel) and the general trend here ... is that oil prices is going to stay soft if not weaken further," said Shaun Osborne, chief currency strategist at TD Securities. For further direction, market participants will be looking at a slew of economic data from the United States on Friday and November gross domestic product figures in Canada. Canadian government bond prices were mixed across the maturity curve, with the longer-term securities lower. The two-year was down 4 Canadian cents to yield 0.455 percent and the benchmark 10-year was off 16 Canadian cents to yield 1.369 percent. (Additional reporting by Alastair Sharp; Editing by Meredith Mazzilli and Peter Galloway)
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