* Oil currencies fall as brent falls below $37
* Safe havens boosted on subdued risk appetite
* Fed policy meeting eyed
* Yuan weakens further after China launches trade-weighted
index
By Jemima Kelly
LONDON, Dec 14 (Reuters) - Oil-rich Canada's dollar hit an
11-1/2-year trough against its U.S. counterpart on Monday as oil
prices slid to seven-year lows, while the Swiss franc and yen
were boosted as investors sought out safe havens.
As brent crude LCOc1 fell below $37 a barrel on growing
fears that a global oil glut will worsen in the coming months,
the Norwegian crown also fell EURNOK=D3 around half a percent,
reversing all its earlier gains. Norway relies on oil and gas
for more than one fifth of its gross domestic product. O/R
With stock prices falling as investors sold their riskier
assets, the Swiss franc, traditionally bought at times of risk
aversion, rose 0.3 percent to 1.0771 francs per euro EURCHF= ,
its strongest since Nov. 12. The yen rose 0.2 percent, trading
at 120.74 yen against the dollar JPY= .
"Now that we are seeing a breakthrough of Friday's lows in
the oil price and we're seeing a sharp acceleration of the fall,
the market is getting nervous," said Commerzbank (DE:CBKG) currency
strategist Esther Reichelt, in Frankfurt.
The Canadian dollar fell 0.2 percent to C$1.3780 CAD=D4 ,
its weakest since April 2004.
The fall in risk appetite also helped the euro EUR= , as
investors who had held euro-funded carry positions, in which
they borrow the euro in order to sell it and buy a
higher-yielding, riskier currency, bought back the single
currency. It traded flat on the day at $1.09785.
The euro had earlier weakened to $1.0945 as investors braced
for the first U.S. interest rate rise in almost a decade. The
Federal Reserve's two-day policy meeting will conclude on
Wednesday, with the key question being how quickly the Fed will
try to normalise policy going forward.
RBC Capital Markets currency strategist Adam Cole, in
London, said that investors were underestimating the pace of
further interest rate rises. Markets are pricing in two hikes in
2016, whereas Cole expects four.
"I'd rather be long the dollar than short this week," he
said. "We think that a rate hike is pretty much a foregone
conclusion but the commentary that goes with it is likely to be
slightly less dovish than some are expecting."
"This notion of a dovish hike is a little bit misguided, we
think, and relative to those expectations (the Fed meeting) is
likely to be dollar positive," he added.
Earlier, China's yuan hit a 4-1/2-year low in onshore
trading CNY=CFXS after the country's central bank again
lowered the yuan midpoint rate CNY=SAEC . That followed
Friday's announcement of a new trade-weighted index, which some
viewed as a green light for further devaluation of the currency.