CANADA FX DEBT-C$ drops to six-year low on big data miss, cheap oil

Wed Mar 18, 2015 9:50am EDT
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* Canadian dollar touches C$1.2835, or 77.91 U.S. cents
    * Weakest level since March 2009
    * Bond prices mostly higher

    By Solarina Ho
    TORONTO, March 18 (Reuters) - The Canadian dollar touched
its weakest level against the U.S. dollar in more than six years
on Wednesday as data showed Canadian wholesale sales tumbled in
January, while crude prices extended their dive as U.S. oil in
storage hit a record high.
    The currency had been sidelined for much of this week ahead
of a policy statement from U.S. Federal Reserve due later in the
session, mainly staying just below the key psychological level
of C$1.28 to the greenback before Wednesday's action. Market
participants will parse through the Fed's language for hints on
whether it will hike interest rates as early as this summer, or
continue to wait.
    "What you've seen in the last little bit is a little bit of
froth in the U.S. dollar market in general," said Brad Schruder,
director of foreign exchange sales at BMO Capital Markets.
    Schruder said the U.S. dollar's strength has been driven by
economic underpinnings rather than rate hike expectations,
noting that the rates market has not responded as though a hike
is imminent.
    "That doesn't mean the greenback isn't going to continue to
strengthen because it will, but I wouldn't be surprised today if
you saw a little 'buy the rumor, sell the fact'."
    At 9:04 a.m. (1304 GMT), the loonie was at C$1.2824 to the
greenback, or 77.98 U.S. cents, weaker than Tuesday's close of
C$1.2785, or 78.22 U.S. cents.
    The value of wholesale sales in Canada had its biggest drop
in six years in January, falling 3.1 percent to C$53.7 billion,
far exceeding economists' expectations of a 0.8 percent fall.
    The disappointing data helped push the Canadian dollar
 to C$1.2835, or 77.91 U.S. cents, at one point, its
weakest level since March 13, 2009.
    Also pressuring the currency was the price of crude, a key
Canadian export. Brent crude fell below $53 a barrel, while U.S.
prices were just above $42 as industry data showed U.S. crude
stocks hit a record high. 
    "I think there's a lot of participants who really believe
we're on the cusp of another shoe dropping for energy. That
alone could push USD/CAD higher," Schruder said.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up 3 Canadian
cents to yield 0.523 percent and the benchmark 10-year
 climbing 35 Canadian cents to yield 1.376 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)