* C$ drops for 5th straight session as oil falls below $36
* Bonds fall as TSX rebounds to close up 2.2 pct
By Jennifer Kwan
TORONTO, Jan 15 (Reuters) - The Canadian dollar finished at its weakest level in a month against the U.S. currency on Thursday, pressured by a drop in the price of oil on growing concerns over the economic downturn and its impact on demand.
Canadian government bond prices followed U.S. Treasuries lower, as both markets reacted to the choppy moves in equities.
The Canadian currency finished at C$1.2515 to the U.S. dollar, or 79.90 U.S. cents, down from C$1.2483 to the U.S. dollar, or 80.11 U.S. cents, on Wednesday.
The currency at one point touched C$1.2678, or 78.88 U.S. cents, its weakest level since Dec. 9, according to Thomson Reuters data.
It has fallen for five straight sessions as oil prices have dropped and economic reports in both Canada and the United States have deepened fears about the depth of the global economic downturn.
“A lot of the economic data, especially from the U.S., has continued to be weak so that brings about a lot of worries about what the fallout will be for the Canadian dollar,” said Charmaine Buskas, senior economics strategist at TD Securities
U.S. economic figures on Thursday — including weekly jobless claims, producer prices and manufacturing readings — all continued the trend. [ID:nN15511415]
As well, the Canadian dollar has been pressured by movements in commodity prices, particularly oil CLc1, which settled lower at $35.40 a barrel on demand fears. [ID:nSYD138214], while base metals prices also weakened. [ID:nLF304733]
Canada is a major oil producer and exporter, and movements in the price of crude and other commodities often sway its currency. Oil has fallen from a peak price above $147 a barrel reached last July.
“The broader theme of risk aversion is still dominating commodity and cyclical currencies,” said Matthew Strauss, senior currency strategist at RBC Capital Markets.
Canadian bond prices followed U.S. Treasuries lower, dropping as U.S. stocks erased earlier losses due to optimism over government stimulus programs.
Toronto’s main stock index .GSPTSE recovered from a 2009 low on Thursday to close up 2.2 percent on stimulus hope.
The overall trend, however, remains positive for the bond market, Buskas said.
“What we’re seeing across the different financial markets is the overarching theme of risk aversion,” she said. “You’re seeing investors more or less flock to the safe havens, and the bond market does tend to be a reasonably good safe haven in this environment.”
The two-year bond was down 9 Canadian cents at C$103.30 to yield 0.964 percent, while the 10-year bond dropped 35 Canadian cents to C$113.70 to yield 2.592 percent.
The yield spread between the two-year and 10-year bond was 163 basis points, versus 162 at the previous close.
The 30-year bond fell C$1.40 to yield 3.492 percent. In the United States, the 30-year Treasury yielded 2.8738 percent. (Reporting by Jennifer Kwan; editing by Peter Galloway)