February 8, 2016 / 9:54 PM / 4 years ago

CANADA FX DEBT-C$ weakens as oil falls, stocks slump

(Adds currency trader comment, details; updates prices to
    * Canadian dollar at C$1.3934 or 71.77 U.S. cents
    * Bond prices higher across the maturity curve
    * Canada 10-year yield hit new record low at 1.054 percent

    By Alastair Sharp
    TORONTO, Feb 8 (Reuters) - The Canadian dollar lost ground
against its U.S. counterpart on Monday as a sell-off in stocks
and a drop in oil prices weighed on the risk-sensitive commodity
currency, while Canada's 10-year government bond yield hit a
record low.
    Investors shed risky assets as worries persisted over the
pace of global growth. 
    The weakness was muted by the greenback's own slip against a
basket of currencies, pressured by a view that the Federal
Reserve would be cautious with its plan to raise U.S. interest
    The Canadian dollar ended the session trading at
C$1.3934 to the greenback, or 71.77 U.S. cents, weaker than
Friday's official close of C$1.3908, or 71.90 U.S. cents.
    The loonie, as Canada's currency is colloquially known, has
traded in a wide range so far this year, starting at C$1.38
before slumping to almost C$1.47 in mid-January and then
recovering to as strong as C$1.3640 last week.
    The currency will likely remain volatile in coming weeks
given the potential for swings in the price of oil, a major
Canadian export, according to Matt Perrier, managing director of
foreign exchange sales at Bank of Montreal. 
    "If we were to see crude fall back into the mid-$20s (a
barrel) then I wouldn't be surprised to see dollar/Canada trade
back up in the C$1.43-C$1.44 area," Perrier said.
    If oil instead approaches $40 a barrel the Canadian currency
could test levels around C$1.35, he said.
    U.S. crude prices settled almost 4 percent lower at
$29.69 a barrel after a Saudi-Venezuela meeting showed few signs
that steps would be taken to boost prices. 
    Canada's main stock index fell 1.8 percent.    
    Speculators have trimmed bearish bets against the Canadian
dollar, a week after they hit their highest in five months, data
showed on Friday. 
    Canadian government bond prices were higher across the
maturity curve amid a flight to safety, while the curve
flattened as the long end outperformed.
    The two-year price rose 5 Canadian cents to yield
0.345 percent and the benchmark 10-year was up 72
Canadian cents, pushing its yield to a record low at 1.054
    A Bank of Canada official said central bankers cannot take
primary responsibility for upholding financial stability because
interest rates are too blunt an instrument to address potential
problems in just one part of the economy. 

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and James Dalgleish)
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