December 31, 2018 / 9:10 PM / 7 months ago

CANADA FX DEBT-C$ steadies near 19-month low; posts worst year since 2015

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    * Canadian dollar trades near flat against the greenback
    * Loonie falls 7.7 percent in 2018
    * Price of U.S. oil rises 0.2 percent
    * Canadian bond prices trade mixed across steeper yield
curve
    * 2-year yield hits six-month low intraday at 1.846 percent

    By Fergal Smith
    TORONTO, Dec 31 (Reuters) - The Canadian dollar on Monday
ended 2018 with its worst annual performance in three years,
hitting a 19-month low against its U.S. counterpart earlier in
the day before reversing its decline as oil prices and stocks
rallied.
    At 3:37 p.m. (2037 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3635 to the greenback, or 73.34
U.S. cents.
    The currency, which has been pressured in recent months by a
sharp drop in the price of oil, one of Canada's major exports,
and volatility in equity markets, hit its weakest intraday level
since May 2017 at 1.3665.
    "It has been a pretty terrible year for the Canadian
dollar," said Rahim Madhavji, president at Knightsbridge Foreign
Exchange. "The combination of a flight to safety plus weak oil
is a recipe for disaster for the Canadian dollar."
    For the year, the loonie was down 7.7 percent, its first
decline since 2015.
    Stocks were boosted on Monday by signs of progress in the
U.S.-China trade dispute, while U.S. crude oil futures       
settled 0.2 percent higher. Still, oil has fallen about 40
percent since October.                              
    "The fact that oil prices are down quite a bit is something
that is going to worry the Bank of Canada," Madhavji said.
    The central bank has raised interest rates five times since
July 2017 to leave its benchmark interest rate at 1.75 percent.
But money markets do not expect any further increases in 2019.
              
    The U.S. dollar        fell against a basket of major
currencies in thin year-end trading as increased risk appetite
weighed on demand for safe-haven currencies.             
    Canadian government bond prices were mixed across a steeper
yield curve, with the two-year            flat to yield 1.862
percent and the 10-year             falling 8 Canadian cents to
yield 1.965 percent.
    In earlier trading, the two-year yield fell to its lowest
since June 29 at 1.846 percent.
    Canadian financial markets will be closed on Tuesday for the
New Year's Day holiday. The country's employment report for
December is due on Friday.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Peter
Cooney)
  
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