December 20, 2018 / 8:37 PM / 2 years ago

CANADA FX DEBT-C$ lags other G10 currencies as oil prices slump

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar trades near flat against greenback
    * Loonie hits its weakest intraday since June 2017 at 1.3530
    * Canadian wholesale trade rises 1 percent in October
    * Price of U.S. oil falls 4.8 percent
    * Canada's 10-year yield hits its lowest since Dec. 20, 2017

    By Fergal Smith
    TORONTO, Dec 20 (Reuters) - The Canadian dollar was little
changed against the greenback Thursday but hit a 1-1/2-year low
earlier in the session and underperformed other G10 currencies,
as investors worried that the slumping price of oil could hurt
Canada's economy.
    Oil prices hit their lowest in more than a year on worries
about oversupply and the outlook for energy demand, as a Federal
Reserve interest rate increase the day before knocked stock
markets. U.S. crude oil futures        settled 4.8 percent lower
at $45.88 a barrel.
    "We have hit the pain threshold in oil," said Adam Button,
chief currency analyst at ForexLive. "Much of the Canadian oil
patch goes underwater at these levels, and it is going to mean
curtailment in production and investment."
    Earlier this month, the Bank of Canada expressed concern
about the outlook for Canada's energy sector when it left its
benchmark interest rate on hold at 1.75 percent.
    The central bank has hiked five times since July 2017. But
bets on further tightening from the central bank crumbled after
the policy announcement, which was perceived as dovish.
    "For the Bank of Canada, the conundrum is that
backward-looking data is strong still, while forward-looking
indications for markets, (such as) commodity prices, some data
are weak," Button said.
    Canadian wholesale trade increased by 1.0 percent in October
from September, Statistics Canada said. Analysts had forecast a
0.4 percent increase.             
    A separate report from ADP showed that Canada added 39,100
jobs in November.             
    Canadian gross domestic product and retail sales data for
October is due on Friday. Also on Friday, the Bank of Canada
will release the winter issue of the Business Outlook Survey.
    At 3:15 p.m. (2015 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3491 to the greenback, or 74.12
U.S. cents. The currency, which was the only G10 currency not to
gain ground against the greenback, touched its weakest level
since June 2017 at 1.3530.       
    The U.S. dollar        fell to a one-month low against a
basket of six major currencies on growing concerns the Fed may
be hiking interest rates just as the world's biggest economy
faces a slowdown.             
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The 10-year            
fell 15 Canadian cents to yield 1.979 percent.
    The 10-year yield touched its lowest intraday since Dec. 20,
2017 at 1.944 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
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