February 9, 2016 / 10:10 PM / 5 years ago

CANADA FX DEBT-C$ higher vs US$, other commodity currencies even as oil falls

(Adds strategist comment, details; updates prices to close)
    * Canadian dollar ends at C$1.3879, or 72.05 U.S. cents
    * Bond prices mixed across the maturity curve
    * Canada 10-year yield hits record low at 1.008 percent

    By Alastair Sharp
    TORONTO, Feb 9 (Reuters) - The Canadian dollar firmed
against a broadly weaker U.S. counterpart on Tuesday even as oil
prices tumbled, although it lost ground against safe-haven
currencies including the Japanese yen and the Swiss franc amid
turmoil in equities worldwide.
    The Canadian currency did better than a string of other
commodity-linked currencies as oil teetered close to a
12-1/2-year low hit last month and financial turbulence fed
doubts about the Federal Reserve's forecast of four U.S.
interest rate hikes this year.  
    "The Canadian dollar is standing there in splendid isolation
relative to that group" of commodity currencies that include the
Russian rouble, Mexican peso and Norwegian crown, said Shaun
Osborne, chief currency strategist at Scotiabank.
    "It may well be that people were just getting too negative
on Canada," he said.
    The Canadian dollar settled at C$1.3879 to the
greenback, or 72.05 U.S. cents, stronger than the Bank of
Canada's official Monday close of C$1.3934, or 71.77 U.S. cents.
    U.S. crude prices settled down 5.9 percent at $27.94
a barrel while Brent lost 6.6 percent to $30.72 on
gloomy U.S. and global demand outlooks.
    Osborne said decent Canadian economic data since early
January, including on wholesale trade, retail sales and
manufacturing, have helped reverse loonie weakness that saw the
currency approach C$1.47 versus the greenback in mid-January.
    Losses in Asian stock markets sent investors scurrying for
safe havens, while a drop in bank shares kept European shares
under pressure. Yields on longer-term Japanese bonds fell below
zero for the first time. 
    The U.S. dollar fell to its lowest in more than three months
against a basket of major currencies, weighed by losses
for equity markets and oil and doubts about the Fed's rate-hike
trajectory. Fed Chair Janet Yellen is due to give testimony on
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up 2 Canadian
cents to yield 0.354 percent and the benchmark 10-year
 flat to yield 1.051 percent after hitting a record
low at 1.008 percent. Longer-dated bond prices rose.
    Scotia's Osborne said the next likely catalyst for the
currency would be the federal budget, given the potential for
significant stimulus spending to boost economic growth and lower
the risk of the Bank of Canada cutting rates.
    Canada's new Liberal government is set to unveil its first
budget in the week of March 21, two sources with knowledge of
the process said on Tuesday. 

 (Additional reporting by Fergal Smith; Editing by W Simon and
James Dalgleish)
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