January 11, 2019 / 8:17 PM / 5 months ago

CANADA FX DEBT-C$ weakens with oil but notches 2nd straight weekly gain

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.2 percent against the greenback
    * Loonie rises 0.8 percent for the week
    * Price of U.S. oil falls 1.9 percent
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Jan 11 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as oil prices fell, but
the loonie still advanced for a second consecutive week after
the Bank of Canada said the challenges facing the economy were
temporary.
     The price of oil, one of Canada's major exports, fell on
worries about a global economic slowdown. U.S. crude oil futures
       settled 1.9 percent lower at $51.59 a barrel.
    Still, oil has rebounded about 22 percent since slumping in
December to an 18-month low.
    "Oil is interesting; super volatile fourth quarter, nice
rebound thus far this year. It is still the hot factor," said
Greg Anderson, global head of foreign exchange strategy in New
York. "The CAD move (today) is almost tick for tick."
    The three-month correlation between the Canadian dollar and
oil has climbed to about 90 percent, according to Refinitiv
Eikon data, indicating the currency and the commodity move
mostly in the same direction. For some months in 2018 the
correlation was negative.
    At 2:51 p.m. (1951 GMT), the Canadian dollar          was
trading 0.2 percent lower at 1.3265 to the greenback, or 75.39
U.S. cents.            
     The currency, which on Wednesday touched its strongest
intraday level in more than 5 weeks at 1.3180, traded in a range
of 1.3183 to 1.3275.
    For the week the loonie was up 0.8 percent. The Bank of
Canada held interest rates steady as expected on Wednesday but
said more rate increases would be necessary even though low oil
prices and a weak housing market will harm the economy in the
short term.                 
    The U.S. dollar        edged higher against a basket of
major currencies despite recent cautious signals from the
Federal Reserve about further rate hikes.                 
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            rose 32 Canadian cents to yield 1.948 percent.
    The gap between Canada's 2- and 10-year yields narrowed by
1.2 basis points to a spread of 5.9 basis points.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and
Meredith Mazzilli)
  
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