October 31, 2018 / 9:21 PM / a year ago

CANADA FX DEBT-C$ hits 7-week low as commodity-linked currencies retreat

 (Adds strategist quote, details on activity; updates prices)
    * Canadian dollar falls 0.4 percent against the greenback
    * Loonie declines 1.9 percent in October
    * Canadian GDP rises 0.1 percent in August
    * U.S. oil prices fall 1.3 percent

    By Fergal Smith
    TORONTO, Oct 31 (Reuters) - The Canadian dollar slumped to a
seven-week low against its broadly stronger U.S. counterpart on
Wednesday, as lower oil prices and worries about prospects for
global growth weighed on commodity-linked currencies.
    At 4:17 p.m. (2017 GMT), the Canadian dollar          was
trading 0.4 percent lower at 1.3159 to the greenback, or 75.99
U.S. cents. The currency touched its weakest level since Sept.
11 at 1.3170.
    For the month, the loonie declined 1.9 percent, its worst
performance since February.
    The price of oil, one of Canada's major exports, fell and
posted the worst monthly performance since mid-2016, pressured
by evidence of rising global crude supply and recent U.S.-China
trade tensions.             
    U.S. crude oil futures        settled 1.3 percent lower at
$65.31 a barrel.
    Anxiety about China's cooling growth and its impact on the
global economy did not let up on Wednesday after data showed
China's manufacturing sector in October expanded at its weakest
pace in over two years.             
    "Any time global growth is under pressure, it is usually the
commodity currencies that will come under fire first," said
Bipan Rai, North America Head, FX strategy at CIBC Capital
    The commodity-linked Australian and New Zealand dollars,
together with the loonie, were the worst performing G10
currencies on Wednesday.
    The U.S. dollar        climbed to its highest level in 16
months against a basket of currencies as private sector payrolls
data showed continued U.S. economic strength.                 
    The Canadian economy grew by 0.1 percent in August from July
on gains in the oil and gas extraction sector, as well as
finance and insurance, Statistics Canada said. Analysts had
forecast no change.             
    Bank of Canada Governor Stephen Poloz repeated his message
that Canadian interest rates would need to keep rising to meet
the central bank's inflation target.             
    Canada's productivity and credit growth face a threat from a
flattening yield curve as it makes it less appealing to invest
in long-term projects, and lesser still if the Bank of Canada
meets its goal of a 3 percent interest rate.             
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries as stocks on Wall Street
rallied. The two-year            fell 4.5 Canadian cents to
yield 2.338 percent and the 10-year             declined 33
Canadian cents to yield 2.494 percent.
    The 2-year yield touched its highest intraday since Oct. 4
at 2.343 percent.
    Canada's jobs report for September and August trade data are
due on Friday.     

 (Reporting by Fergal Smith
Editing by Susan Thomas and Richard Chang)
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