CANADA FX DEBT-C$ extends retreat as BoC rate cut impact lingers

* Canadian dollar at C$1.2443 or 80.37 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Jan 26 (Reuters) - The Canadian dollar continued to
test new 5-1/2 lows against its U.S. counterpart on Monday,
extending last week's hefty losses after the Bank of Canada
blindsided markets with a 25 basis point cut to its benchmark
interest rate.
    The Bank of Canada delivered the wholly unexpected rate cut
last Wednesday, its first rate change since September 2010,
ending the longest period of unchanged rates in Canada since
    "It's a continuation of what we've seen over the past week
or so, of financial markets digesting the news from the Bank of
Canada, that they're much more worried than what analysts were
expecting," said Charles St-Arnaud, senior economist and
strategist at Nomura Securities in London.
    "In general, a very gradually weakening trend ... we'll see
over next few weeks and probably even months."
    At 9:32 a.m. (1432 GMT), the Canadian dollar was at
C$1.2443 to the greenback, or 80.37 U.S. cents, weaker than
Friday's close of C$1.2424, or 80.49 U.S. cents.
    Earlier in the session, the Canadian dollar retreated as far
as C$1.2476, or 80.15 U.S. cents, its weakest level since April
2009. Last week, the loonie tumbled 3.7 percent.
    Crude prices turned positive on Monday after the
secretary-general of the OPEC producer group said he expected
the market to bottom out around current levels, which helped
temper some earlier losses. 
    Because Canada is a major oil exporter, the Canadian dollar
has taken a beating alongside crude prices, which have tumbled
since June on dwindling demand and a glut in the global
    One of this week's main economic events will likely be the
U.S. Federal Reserve's statement after it meets on Tuesday and
Wednesday. St-Arnaud said he expects the statement will show
little change in policy. The Fed is widely expected to raise
rates in mid 2015.
    Canadian government bond prices were mixed across the
maturity curve, with longer-term securities falling. The
two-year bond eased 2 Canadian cents to yield 0.546
percent and the benchmark 10-year bond slipped 28 
Canadian cents to yield 1.473 percent.

 (Reporting by Solarina Ho; Editing by Peter Galloway)