* Canada trade surplus narrows more than expected
TORONTO, Jan 13 (Reuters) - The Canadian dollar fell against the U.S. currency on Tuesday, hitting its weakest level this month, pressured by weaker commodity prices and data that showed the country’s trade surplus narrowed more than expected.
The Canadian currency was at C$1.2296 to the U.S. dollar, or 81.33 U.S. cents, down from C$1.2154 to the U.S. dollar, or 82.28 U.S. cents, on Monday.
Statistics Canada said on Tuesday that the country’s trade surplus narrowed more than expected in November to C$1.28 billion, its lowest since October 1997, due to plummeting oil prices and the resulting slide in exports. [ID:N13254064]
“It shows that the terms of trade for Canada is obviously starting to be impacted fairly significantly by the global economic slowdown, especially the slowdown we’re seeing in the United States,” said George Davis, chief technical strategist at RBC Capital Markets.
The Canadian currency was also pressured by a fall in the price of oil CLc1, which weakened on more signs the global economic downturn is dampening demand. [ID:nSYD384129].
Canada is a major oil producer and exporter and any movements in the price of crude often sways the Canadian currency. Oil has fallen from its peak above $147 a barrel reached in July.
“The market is still focused on the themes of risk aversion and developments in commodity markets,” said Davis. “What we’ve seen since Friday’s employment reports is an increase in risk aversion, which has pushed equity markets lower.
The two-year bond was down 3 Canadian cents at C$103.15 to yield 1.050 percent, while the 10-year bond fell 3 Canadian cents to C$112.22 to yield 2.761 percent.
The yield spread between the two-year and 10-year bond was at 170 basis points, versus 172 basis points at the previous close.
The 30-year bond slipped 10 Canadian cents to yield 3.605 percent. In the United States, the 30-year Treasury yielded 3.0053 percent. (Reporting by Jennifer Kwan, editing by Jeffrey Hodgson)