July 29, 2008 / 1:44 PM / in 9 years

Canadian dollar in longest decline since early '07

TORONTO (Reuters) - The Canadian dollar trickled lower against the U.S. dollar for a sixth-straight session on Tuesday, its longest losing streak in nearly a year and a half, due in part to a stronger greenback and softer commodity prices.

Domestic bond prices, with no key data to influence a move, were mostly lower, taking direction from the U.S. market.

The Canadian currency closed at C$1.0238 to the U.S. dollar, or 97.68 U.S. cents, down from C$1.0230 to the U.S. dollar, or 97.75 U.S. cents, at Monday’s close.

During the day, the currency slipped as far as C$1.0274 to the U.S. dollar, its lowest level since June 16, but was still well off its low point of C$1.0380 for the year, hit January 22.

The last time the Canadian dollar fell for six straight sessions was in late February and early March 2007.

“Another tough day for the Canadian dollar and another good day for the U.S. dollar,” said Steve Butler, director of foreign exchange trading at Scotia Capital.

The greenback rose against most major currencies as oil and other commodity prices softened and a report showed that U.S. consumer confidence unexpectedly perked up in July.

Canada is a major exporter of many commodities and is the biggest supplier of oil to the United States.

U.S. crude oil CLc1 fell to a 12-week low on Tuesday, on mounting concern that high prices were beginning to eat into global demand.

Much of the Canadian dollar’s nearly 60 percent rise between 2002 and late 2007 was credited to rising oil prices.

While that link has diminished this year, a further decline in oil prices, along with a continuation of some recent soft domestic data, could lead to a Canadian dollar that is quite a bit weaker, said Butler.

“I think that the risks are that we are six to nine months behind the U.S. and we are going to continue to see some softness out of Canada and more woes in the financial sector,” he said.

“That means, perhaps, especially if commodities continue to soften up, we might finally get out of this range we’ve been in and trade back up to C$1.0850 or C$1.10.”

BOND PRICES MOSTLY LOWER

Bond prices were mostly lower, taking direction from the larger U.S. market, as weaker oil prices and the stronger U.S. consumer confidence data took some of the steam out of the safe-haven bid for government debt.

Bonds had started out a touch higher as dealers digested news from late Monday that Merrill Lynch MER.N said it would take a $5.7 billion third-quarter writedown and raise $8.5 billion by selling new stock.

But the mood turned positive as the market took the news as a sign that the U.S. banking sector was really starting to scrub the balance sheets of those financial products that have been causing writedown after writedown since the credit crunch, said Stewart Hall, market strategist at HSBC Canada.

“Perhaps this is in a sense the last push to cleanse the balance sheets of these types of products.”

Canada’s economic data calendar picks up on Wednesday with the industrial product price and raw materials price indexes for June, followed by May’s gross domestic product numbers on Thursday.

Then attention will switch back to the U.S. market on Friday, with jobs data, auto sales and the Institute for Supply Management’s non-manufacturing data, all for June.

The two-year bond rose 2 Canadian cents to C$101.23 to yield 3.053 percent. The 10-year bond dropped 6 Canadian cents to C$103.79 to yield 3.784 percent.

The yield spread between the two-year and 10-year bond was 73.1 basis points, up from 70.9 basis points.

The 30-year bond dropped 34 Canadian cents to C$114.36 for a yield of 4.142 percent. In the United States, the 30-year treasury yielded 4.631 percent.

The three-month when-issued T-bill yielded 2.46 percent, down from 2.47 percent at the previous close.

Reporting by John McCrank; editing by Rob Wilson

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