December 18, 2018 / 10:14 PM / 2 years ago

CANADA FX DEBT-C$ hits 18-month low as oil prices slump

 (Adds strategist quotes and details on activity, updates
    * Canadian dollar falls 0.4 percent against the greenback
    * Loonie hits its weakest since June 2017 at 1.3497
    * Price of U.S. oil falls 7.3 percent
    * Canadian factory sales fall 0.1 percent in October 
    * Canada's 10-year yield hits a nearly one-year low

    By Fergal Smith
    TORONTO, Dec 18 (Reuters) - The Canadian dollar weakened to
a 1-1/2-year low against its U.S. counterpart on Tuesday,
underperforming most other G10 currencies as the price of oil,
one of Canada's major exports, slumped.
    At 4:48 p.m. (2148 GMT), the Canadian dollar          was
trading 0.4 percent lower at 1.3459 to the greenback, or 74.30
U.S. cents. The currency touched its weakest level since June
2017 at 1.3497.
    Among G10 currencies, the loonie was the second worst
performer. The worst was another oil-linked currency, the
Norwegian krone.
    U.S. crude oil futures        settled 7.3 percent lower at
$46.24 a barrel as the market grappled with reports that U.S.
supply would continue to surge even if demand weakens as global
growth deteriorates, which many expect.                 
    "It's all oil," said Win Thin, global head of emerging
markets strategy at Brown Brothers Harriman in New York. "I
think everyone is really freaking out about the global slowdown
    The Bank of Canada has worried that lower oil prices and
cutbacks in production will reduce activity in Canada's energy
    The Canadian government said on Tuesday that it would spend
C$1.6 billion, mostly through loans, to assist the country's oil
and gas industry, which has struggled to move energy to U.S.
markets because of full pipelines.               
    Adding to headwinds for the loonie, Canadian factory sales
edged down by 0.1 percent in October from September on lower
wood product and primary metal manufacturing sales, Statistics
Canada said.             
    The U.S. dollar        fell to a one-week low as investors
unwound long bets on the currency, anticipating that the Federal
Reserve could slow the pace of U.S. interest rate hikes after
this week's policy meeting.             
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 6.5 Canadian cents to yield 1.925 percent and the 10-year
            climbed 23 Canadian cents to yield 2.015 percent.
    The 10-year yield touched its lowest intraday since Dec. 28,
2017, at 2.007 percent.
    Canada's inflation report for November is due on Wednesday.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
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