CANADA FX DEBT-C$ drops as oil retreat resumes; Bank of Canada in focus
(Adds comment, details and closing figures) * Canadian dollar at C$1.1394 or 87.77 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, Dec 2 (Reuters) - The Canadian dollar fell against the greenback on Tuesday on uncertainty over whether crude oil prices have bottomed out, with the market also concerned about how plunging oil might figure into the Bank of Canada's policy statement on Wednesday. Canada is a major exporter of crude and its currency has dropped in recent months as oil prices have dived. Last week, the Organization of the Petroleum Exporting Countries decided not to cut back its production targets, news that sent oil prices on a volatile ride and left the market nervous about how low crude prices, already on a five-month decline, can go. Prices fell again on Tuesday, hurt by factors including a deal that will add more Iraqi crude to already oversupplied markets. "This market (is) looking for a balance still. Last week's activity with the thin liquidity brought about by the U.S. holiday really caught the market a little bit flat-footed," said Brad Schruder, director of foreign exchange sales at BMO Capital Markets in Toronto. "The loonie lost 2 cents in about 48 hours. Yesterday it recouped about half of that, and now we're almost right back to where we were mid-afternoon on Friday." The Canadian dollar finished at C$1.1394 to the greenback, or 87.77 U.S. cents, weaker than Monday's close of C$1.1328, or 88.28 U.S. cents. Analysts said investors were likely positioning themselves ahead of the Bank of Canada policy statement and interest rate decision on Wednesday. "The emerging view is that you've had strong data growth and inflation numbers, but the plunge in oil prices kind of gives a bit of an out, if you will, for the (Bank of Canada) governor to signal some cautiousness," said Mazen Issa, senior Canada macro strategist at TD Securities, adding that TD believes the central bank could end up offering a more balanced view than has been anticipated. "If they are a little bit more balanced tomorrow than people may be expecting, then you could see a little bit more of a stronger CAD against the U.S. dollar." Canadian government bond prices were mixed across the maturity curve, with T-bills higher and longer-dated maturities slipping. The two-year bond was down 4 Canadian cents, with a yield of 1.010 percent and the benchmark 10-year bond was down 51 Canadian cents, yielding 1.955 percent. (Additional reporting by Leah Schnurr; Editing by Peter Galloway)
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