CANADA FX DEBT-C$ hits fresh 12-year low, pares losses after Poloz speech

Thu Jan 7, 2016 9:14am EST
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* Canadian dollar at C$1.4130, or 70.77 U.S. cents
    * Bond prices mixed across maturity curve

    By Fergal Smith
    TORONTO, Jan 7 (Reuters) - The Canadian dollar fell to a
fresh 12-year low against its U.S. counterpart on Thursday as a
rout in stocks and weaker crude oil prices weighed on
commodity-linked currencies, but it pared some losses after a
speech by Bank of Canada Governor Stephen Poloz.
    The latest tumble in crude oil prices and the loss of
momentum in the Canadian economy has led to speculation Canada's
central bank will cut interest rates. But some analysts said
Poloz's speech did not seem to hint at a cut. 
    "He is repeating many of the themes from before the holidays
about how they have policy flexibility and the necessary tools
if they need them," said Derek Holt, vice president of economics
at Scotiabank.
    Oil fell below $33 a barrel for the first time since April
2004 as a fall in Chinese stocks rattled investors already
concerned by near-record production and massive stockpiles of
unwanted crude and refined products. 
    Poloz is scheduled to give a press conference at 9:15 a.m.
EST (1415 GMT). It may be a better venue for him to focus on
recent market developments, according to Holt, including China's
attempts to devalue its currency in an orderly fashion and the
knock-on effects on commodities. 
    "I wouldn't be surprised to see a bit more dovish bias and
discussion at the press conference than in the speech," Holt
    At 8:53 a.m. EST (1353 GMT), the Canadian dollar 
was trading at C$1.4130 to the greenback, or 70.77 U.S. cents,
weaker than the Bank of Canada's official close on Wednesday of
C$1.4080, or 71.02 U.S. cents.
    The currency's strongest level of the session was C$1.4065,
while it hit its weakest level since July 2003 at C$1.4170.
    U.S. crude prices were down 2.94 percent to $32.97 a
barrel, while Brent crude lost 2.72 percent to
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down 2
Canadian cents to yield 0.422 percent and the benchmark 10-year
 rising 8 Canadian cents to yield 1.319 percent.
    The Canada-U.S. two-year bond spread was 2.3 basis points
narrower at -54.6 basis points, while the 10-year spread was 0.8
of a basis point narrower at -84.1 basis points as Treasuries
outperformed on a flight to safety.

 (Reporting by Fergal Smith; Editing by Paul Simao)