CANADA FX DEBT-C$ hits one-month low after oil drop, U.S. data

* Canadian dollar touches lowest level in a month

* C$ falls on U.S. retail sales data, oil’s drop

* Bonds rise as Toronto stocks close down 3 percent

TORONTO, Jan 14 (Reuters) - The Canadian dollar fell to its lowest level in a month against the U.S. currency on Wednesday, hurt by lower oil and grim U.S. retail sales figures that intensified fears about the global economy.

Domestic government bond prices followed U.S. Treasuries higher, boosted by the negative data and a stock market drops in both countries. Toronto's main stock index .GSPSTE slumped 3 percent on the poor U.S. economic reading.

The Canadian currency closed at C$1.2483 to the U.S. dollar, or 80.11 U.S. cents, down from C$1.2248 to the U.S. dollar, or 81.65 U.S. cents, on Tuesday.

The unit fell for four straight sessions and earlier in the day touched a low of C$1.2494 to the U.S. dollar, or 80.04 U.S. cents, its lowest level since December 12, according to Thomson Reuters data.

U.S. government data showed sales at U.S. retailers fell a more than expected 2.7 percent in December as the economic downturn spurred consumers to cut back on spending. [ID:nN14464017]

Also weighing on the Canadian unit was the price of oil CLc1, which settled down at $37.28 a barrel, pressured by rising inventories and the downtrodden retail sales reading [ID:nLE263762]. Gold and most base metals also weakened. [ID:nLE412902]

Canada is a major oil producer and exporter, and movements in the price of crude and other commodities often sway the Canadian currency. Oil has fallen from a peak price above $147 a barrel reached last July.

The Canadian dollar was also hit by a global increase in risk aversion after Standard & Poor’s cut Greece’s sovereign debt rating, which helped to boost the U.S. dollar. [ID:FRX/]

The U.S. dollar rallied as economic pressures worldwide prompted traders to flock to the greenback for “financial refuge,” said David Watt, senior currency strategist at RBC Capital Markets.

“It leaves an underlying bullish U.S. dollar backdrop,” said Watt.

The Canadian currency has weakened in recent sessions following a string of sullen economic data and reports. The Conference Board of Canada on Wednesday that said Canada’s economy will stay in a recession for three quarters and contract 0.5 percent annually in 2009 with the jobless rate peaking at 8.1 percent. [ID:N14455792]

That bleak forecast comes as figures on Tuesday showed a big drop in Canada’s trade surplus and Bank of Canada surveys on Monday that showed tightening lending conditions and poor business sentiment.

“Almost everything is bearish for the Canadian dollar right now,” said Watt.


Canadian bond prices were higher across the curve as investors facing a bleak economic outlook dumped riskier assets such as stocks and sought safer bets.

“The U.S. retail sales numbers were much weaker than expected this morning. That obviously painted a bleaker economic picture going forward,” said Benjamin Reitzes, economist at BMO Capital Markets.

The two-year bond was up 16 Canadian cents at C$103.36 to yield 0.937 percent, while the 10-year bond rose C$1.47 to C$114.02 to yield 2.557 percent.

The yield spread between the two-year and 10-year bond was at 162 basis points, versus at 170 basis points at the previous close.

The 30-year bond climbed C$2.80 to yield 3.431 percent. In the United States, the 30-year Treasury yielded 2.888 percent. (Reporting by Jennifer Kwan; editing by Jeffrey Hodgson)