CANADA FX DEBT-Canada dollar touches 4-month low after Iran deal

Mon Nov 25, 2013 4:48pm EST

* C$ at C$1.0548 vs US$, or 94.80 U.S. cents
    * Loonie falls as Iran deal weighs on oil prices
    * Bond prices mixed across the curve


    By Leah Schnurr
    TORONTO, Nov 25 (Reuters) - The Canadian dollar weakened
against the greenback on Monday as the deal reached over the
weekend to curb Iran's nuclear program drove oil prices lower,
weighing on the commodity-linked currency.
    The Canadian dollar touched a more than four-month low in
the overnight session, extending last week's weakness after a
tame inflation report and comments from the head of the Bank of
Canada underscored market expectations that interest rates will
be kept low for some time. 
    Iran and six world powers struck a deal on Sunday under
which Tehran is to limit its nuclear energy program in exchange
for initial relief from international trade and financial
sanctions. 
    The deal sent oil prices lower, though U.S. crude futures
 pared declines to settle down 75 cents at $94.09 a
barrel. Canada is a major oil exporter, making its currency
sensitive to fluctuations in oil prices.
    "The Iran deal and the subsequent impact on oil prices does
attract attention to the fact that oil and commodities generally
have been softer for the last two or three months as it is,"
said Greg Moore, FX strategist at TD Securities in Toronto.
    In recent months, investors have had their attention on
central bank policy on both sides of the border, but the impact
of weaker commodities could garner more focus for now, said
Moore.
    The Canadian dollar ended the North American
session at C$1.0548 versus the U.S. dollar, or 94.80 U.S. cents,
weaker than Friday's close of C$1.0524, or 95.02 U.S. cents. The
loonie hit a low of C$1.0584 over night, its lowest since early
July.
    With the Canadian dollar pushing toward those July levels,
the move may be based more on momentum than fundamentals, said 
Gareth Sylvester, director at Klarity FX in San Francisco.
    "Regardless of fundamental influences, (traders) simply want
to see if they can drive price action up to match those highs
once again," said Sylvester.
    If the loonie is able to close above C$1.0608, the next
technical target will be C$1.0850, he said.
    The domestic economic calendar is light this week and
trading could be quieter heading into the U.S. Thanksgiving
holiday on Thursday. 
    Focus will be on Friday's Canadian gross domestic product
report, with growth in the third quarter forecast to pick up to
a 2.5 percent annualized rate. 
    Canadian bond prices were mixed across the maturity curve,
with the two-year bond off half a Canadian cent to
yield 1.108 percent, while the benchmark 10-year bond
 was up 15 Canadian cents to yield 2.558 percent.
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