February 8, 2018 / 10:32 PM / 8 months ago

CANADA FX DEBT-Loonie hits six-week low as oil, equities fall

    * Canadian dollar at C$1.2601 or 79.36 U.S. cents
    * Bond prices largely higher across yield curve

 (Adds quote, updates prices)
    Feb 8 (Reuters) - The Canadian dollar touched a six-week low
against the greenback on Thursday as oil prices tumbled and a
renewed sell-off in domestic and U.S. stock markets prompted
investors to proceed with caution.
    Commodity-linked currencies, such as the Canadian dollar
tend to underperform when stocks fall. The loonie has retreated
nearly 3 percent since Wall Street began to head sharply lower
on Friday.    
    After two sessions of relative calm, stocks resumed their
declines on Thursday, with Toronto's main stock index          
ending down 1.7 percent, while the U.S. benchmark S&P 500       
lost more than 4 percent.           
    "All these things are related - equities go down, people see
that as a worrying sign about the economy, commodity prices come
off, the loonie weakens as a result," said Amo Sahota, director
at Klarity FX in San Francisco.
    At 4:57 p.m. EST (2157 GMT), the Canadian dollar         
was trading at C$1.2601 to the greenback, or 79.36 U.S. cents,
down 0.3 percent. The currency hit a session low of C$1.2516,
its weakest since Dec. 28.
    The price of oil, one of Canada's major exports, hit a
seven-week low, with U.S. crude        prices ending down 64
cents at $61.15 a barrel.      
    "It's really clear to me that oil has become very much a
focus point again for loonie traders," said Sahota.
    Bank of Canada Senior Deputy Governor Carolyn Wilkins told
Reuters in an interview that while high household debt was the
biggest vulnerability facing the economy and uncertainty about
NAFTA was weighing on the outlook, the central bank was
factoring in the economy's overall performance as it makes its
next rate decision.             
    The central bank last month raised its benchmark interest
rate to 1.25 percent, its third hike since July. Markets expect
the bank to pause at its next meeting in March but have nearly
fully priced in another increase by May.           
    Investors will turn their attention to Friday's domestic
jobs report, with the economy forecast to have added 10,000 jobs
in January after seeing robust growth in 2017.
    The report has become a major focal point for the market
since the Bank of Canada said the labor market was tightening,
Sahota said.
    Canadian government bond prices largely rose, with the
two-year            up 2.5 Canadian cents to yield 1.834
percent. The 10-year             rose 1 Canadian cent to yield
2.373 percent.

 (Reporting by Fergal Smith in Toronto and Leah Schnurr in
Ottawa; Editing by Peter Cooney)
  
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