March 21, 2019 / 7:50 PM / 7 months ago

CANADA FX DEBT-C$ hits 9-day low as investors cool on Canada's prospects

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.6 percent against the greenback
    * Price of U.S. oil declines 0.4 percent
    * Canadian wholesale trade rises 0.6 percent in January
    * Canada's 10-year yield hits 21-month low at 1.635 percent

    By Fergal Smith
    TORONTO, March 21 (Reuters) - The Canadian dollar declined
to a nine-day low against its broadly stronger U.S. counterpart
on Thursday, as oil prices fell and investors worried that
slower U.S. growth could hurt Canada's export-dependent economy.
    At 3:24 p.m. EDT (1924 GMT), the Canadian dollar        was
trading 0.6 percent lower at 1.3380 to the greenback, or 74.74
U.S. cents. The currency touched its weakest since March 12 at
1.3401.
    "The Canadian dollar, which has been a darling of the market
for a while, is finally seeing some significant headwinds come
its way," said Amo Sahota, director at Klarity FX in San
Francisco. "If the U.S. is concerned (about the outlook), then
Canada needs to be more concerned as the little neighbor."
    On Wednesday, Federal Reserve policymakers downgraded their
U.S. growth, unemployment and inflation forecasts.             
    Canada sends about 75 percent of its exports, including oil,
to the United States.
    U.S. crude oil futures        settled 0.4 percent lower on
Thursday at $59.98 a barrel, while the U.S. dollar       
rallied against a basket of major currencies.
    A report by Fitch Ratings saying that Canadian fiscal
deficits will make the economy more vulnerable in a downturn,
added to pressure on the Canadian dollar, Sahota said.
    Canada's combined federal and provincial government debt
"remains close to a level that is incompatible with 'AAA'
status," Fitch Ratings said.
    On Tuesday, Canada presented a federal budget that forecast
a bigger fiscal deficit of C$19.8 billion in 2019-20 and
projected a nearly 20 percent jump in bond issuance.
            
    Worries about the outlook overshadowed domestic data on
Thursday showing increased hiring in February and a
stronger-than-expected rise in January wholesale trade.
                            
    Canada's inflation report for February and January retail
sales data are due on Friday.
    Canadian government bond prices edged lower across much of
the yield curve, with the 10-year             falling 6 Canadian
cents to yield 1.673 percent. Still, the 10-year yield touched
its lowest intraday since June 2017 at 1.635 percent.

 (Reporting by Fergal Smith
Editing by Alistair Bell)
  
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