July 29, 2008 / 9:26 PM / in 12 years

Canadian dollar in longest decline since early '07

 * Canadian dollar falls for sixth straight session
 * Currency's longest losing streak since early 2007
 * Bonds mostly lower on U.S. optimism
 By John McCrank
 TORONTO, July 29 (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
 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 Jan. 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 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
 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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