CANADA FX DEBT-Canadian dollar firms as investors assess lockdown risk

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar strengthens 0.1% against greenback * Canadian retail sales rise 1.6% in October * Price of U.S. oil settles 3.7% higher * Canadian bond yields rise across the curve By Fergal Smith TORONTO, Dec 21 (Reuters) – The Canadian dollar edged higher against its U.S. counterpart on Tuesday but holding near its weakest level since the start of the year as investors weighed how far domestic restrictions would go to curb the fast-spreading Omicron coronavirus variant. The loonie was trading 0.1% higher at 1.2923 to the greenback, or 77.38 U.S. cents, after trading in a range of 1.2914 to 1.2947. On Monday, the currency briefly traded below a multimonth low it hit in August at about 1.2950. “The market is pausing at this technical level, waiting to see if we are going to go into a full shutdown,” said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc. The severity of economic curbs could impact the Bank of Canada policy outlook, Richardson added. On Monday, Quebec, Canada’s second most populous province, ordered bars, gyms and casinos shut and directed people to work only from home due to spiking COVID-19 cases. Money markets expect the Bank of Canada to begin hiking interest rates in March in an effort to cool inflation. Domestic data on Monday showed that retail sales rose 1.6% in October from September, beating estimates. Preliminary estimates for November showed that retail sales rose 1.2% and wholesale trade was up 2.7%. The modest gain for the loonie came as shares globally and the price of oil , one of Canada’s major exports, rebounded after slumping the day before on worries that the new variant would derail economic recovery around the world. U.S. crude prices settled 3.7% higher at $71.12 a barrel, while Canadian government bond yields climbed across the curve, tracking the move in U.S. Treasuries. The 10-year was up 6.1 basis points at 1.453%, after touching on Monday its lowest intraday level since Sept. 23 at 1.282%. (Reporting by Fergal Smith Editing by Mark Heinrich and Jonathan Oatis)

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