December 7, 2015 / 2:51 PM / 3 years ago

Canadian dollar weakens with crude oil, hits new 11-year low

TORONTO (Reuters) - The Canadian dollar hit its weakest level in more than 11 years on Monday, pressured by further slippage in crude oil and the likely start of U.S. Federal Reserve tightening next week.

Canadian Loonies, otherwise known as a one dollar coin, are displayed on top of an American currency in this posed photograph in Toronto, October 10, 2008. REUTERS/Mark Blinch

Oil prices edged closer to 2015 lows after the Organization of the Petroleum Exporting Countries (OPEC) ended its policy meeting on Friday without agreeing to lower production.

U.S. crude CLc1 prices were down 3.35 percent to $38.63 a barrel, while Brent crude LCOc1 lost 2.65 percent to $41.86.[O/R]

On Friday, Canadian data suggested the economy was off to a weak start in the final quarter of 2015 after just recently emerging from a mild recession.

Speculators added slightly to bearish bets on the Canadian dollar, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.

Net short exposure rose to -38,980 contracts, as of Dec 1, 2015, from -38,617 contracts in the prior week.

At 9:21 a.m. EST (1421 GMT), the Canadian dollar CAD=D4 was trading at C$1.3486 to the greenback, or 74.15 U.S. cents, much weaker than the Bank of Canada’s official close on Friday of C$1.3377, or 74.76 U.S. cents.

The currency’s strongest level of the session was C$1.3363, while its weakest level was C$1.3492.

That was its weakest level since mid-2004.

Against the euro, losses for the Canadian dollar were more restrained, with the currency weakening to C$1.4570. European Central Bank President Mario Draghi said on Friday the ECB could deploy more stimulus if needed.

Canadian government bond prices were mixed across the maturity curve, with the two-year CA2YT=RR up 1 Canadian cent to yield 0.625, the five-year CA5YT=RR price down 4 Canadian cents to yield 0.926 percent, and the benchmark 10-year CA10YT=RR rising 4 Canadian cents to yield 1.575 percent.

The Canada-U.S. 5-year spread was 1.1 basis points narrower at -78.4 basis points, trimming recent outperformance for Canada’s 5-year bond.

Bank of Canada Governor Stephen Poloz will speak Tuesday on “The Evolution of Unconventional Monetary Policy,” six days after the Bank of Canada held interest rates steady in its last rate decision of the year.

Reporting by Fergal Smith; Editing by Nick Zieminski

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