December 21, 2018 / 9:34 PM / 2 years ago

CANADA FX DEBT-C$ hits 19-month low as risk aversion offsets GDP gain

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar falls 0.7 percent against the greenback
    * Loonie touches its weakest since May 2017 at 1.3601       
    * Canadian GDP rises 0.3 percent in October
    * Price of U.S. oil falls 0.6 percent
    * Canadian bond prices fall across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 21 (Reuters) - The Canadian dollar fell to a
19-month low against its broadly stronger U.S. counterpart on
Friday, as declines for stocks and the price of oil offset data
showing stronger-than-expected growth in the domestic economy.
    At 4:00 p.m. (2100 GMT), the Canadian dollar          was
trading 0.7 percent lower at 1.3598 to the greenback, or 73.54
U.S. cents. The currency touched its weakest level since May
2017 at 1.3601.
    For the week, the loonie was down 1.6 percent, its biggest
drop since June.
    "We are seeing an extremely orderly move but a weakening
Canadian dollar, as would be expected with lower oil prices and
deteriorating risk appetite," said Greg Anderson, global head of
foreign exchange strategy at BMO Capital Markets in New York.
    Wall Street stocks fell in volatile trading amid concerns of
slowing growth and a looming U.S. government shutdown.
    Canada exports many commodities, including oil, and runs a
current account deficit, so its economy could be hurt if the
global flow of trade or capital slows.
    The price of oil extended its recent drop as global
oversupply kept buyers away from the market ahead of upcoming
holidays. U.S. crude oil futures        settled 0.6 percent
lower at $45.59 a barrel.             
    Still, the loonie performed better than most other G10
currencies, including the oil-linked Norwegian krone.
    Speculators have cut their bearish bets on the Canadian
dollar for the second straight week, data from the U.S.
Commodity Futures Trading Commission and Reuters calculations
showed. As of Dec. 18, net short positions had fallen to 7,457
contracts from 11,669 a week earlier.
    Canada's economy expanded at a faster-than-expected 0.3
percent pace in October, but evidence of economic momentum
heading into the end of the year may not be enough to shift the
Bank of Canada from the sidelines due to the recent slump in oil
    Canadian companies expect sales growth to stabilize over the
next year, and say labor pressures and various tariffs mean
input and output prices will start to rise more quickly, a Bank
of Canada survey said.             
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 4 Canadian cents
to yield 1.947 percent and the 10-year             falling 9
Canadian cents to yield 2.025 percent.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 5.2 basis points to a spread of 69.4
basis points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Jonathan Oatis)
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