December 21, 2015 / 10:14 PM / 3 years ago

C$ weakens even as U.S. crude stabilizes

TORONTO/OTTAWA (Reuters) - The Canadian dollar weakened slightly against the greenback on Monday with a lack of liquidity and last week’s significant decline leading to a tight trading range.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The Canadian dollar has lost about 20 percent for 2015 so far, putting it on track for its worst year since the global financial crisis in 2008. The loonie has been pummeled by the slide in oil, two interest rate cuts by the Bank of Canada and favor for its U.S. counterpart as the Federal Reserve started raising rates.

The currency touched a more than 11-year low of C$1.4003 on Friday before backing off the psychologically important level.

“That’s the big line in the sand right now, that C$1.40 level,” said Scott Smith, senior market analyst at Cambridge Global Payments.

“Unless we see oil take a nose dive heading into the holidays, I think C$1.40 or just around there will be well defended and it will likely be the beginning of January before we get some more decisive price action to whether or not U.S. dollar-Canadian dollar moves materially higher.”

The Canadian dollar CAD=D4 ended the North American session at C$1.3965 to the greenback, or 71.61 U.S. cents, weaker than Friday’s close of C$1.3945, or 71.71 U.S. cents.

Brent crude prices hit their lowest in more than 11 years on Monday, hounded by a relentless rise in global supply that looks set to outpace demand again next year. [O/R]

U.S. crude CLc1 prices settled up 1 cent at $34.74 a barrel while Brent crude LCOc1 lost 53 cents to $36.35.

The domestic economic calendar is light this week except for Wednesday’s release of economic growth and retail sales for October.

Other figures have suggested the final quarter of 2015 had a weak start after the economy emerged from recession in the third quarter. Economists expect the growth of 0.2 percent in October. [ECONCA]

“The Canadian dollar is susceptible to negative news,” said Smith.

“If GDP continues to underwhelm because of the tertiary effects of the oil and gas slowdown in western Canada, that will continue to weigh on the loonie.”

Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR price up 2 Canadian cents to yield 0.491 percent and the benchmark 10-year CA10YT=RR rising 15 Canadian cents to yield 1.383 percent.

The Canada-U.S. two-year bond spread was -46.1 basis points while the 10-year spread was -81.4 basis points.

Reporting by Alastair Sharp and Leah Schnurr; editing by Grant McCool

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