C$ dips with lower crude oil prices, trimming last week's rally

Mon Jan 25, 2016 9:48am EST
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TORONTO (Reuters) - The Canadian dollar fell against its U.S. counterpart on Monday, trimming last week's gains, as Friday's short-covering rally in crude oil prices was partly unwound.

The currency rallied 3.0 percent last week after the Bank of Canada surprised many traders by leaving its policy rate on hold at 0.50 percent.

However, expectations that the central bank will cut by July has nudged higher to 86 percent. It was 78 percent after much stronger than expected retail sales data on Friday.

U.S. crude oil prices fell more than 3 percent as Iraq announced record-high oil production.

At 9:18 a.m. EST, the Canadian dollar CAD=D4 was trading at C$1.4193 to the greenback, or 70.46 U.S. cents, weaker than Friday's official close of C$1.4150, or 70.67 U.S. cents.

The currency's strongest level of the session was C$1.4127, while its weakest level was C$1.4220.

Bearish bets on the Canadian dollar rose in the week ended Jan. 19. Net short Canadian dollar positions increased to 66,386 contracts from 59,214 in the prior week, according to data from the Commodity Futures Trading Commission released on Friday.

Attention has shifted to the U.S. Federal Reserve interest rate announcement on Wednesday, as well as the conclusion of the Bank of Japan policy meeting on Friday.

Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR price up 3 Canadian cents to yield 0.441 percent and the benchmark 10-year CA10YT=RR rising 30 Canadian cents to yield 1.285 percent.   Continued...

The new Canadian five and 10 dollar bills, made of polymer, are displayed with the previously released 20, 50 and 100 dollar notes following an unveiling ceremony at the Bank of Canada in Ottawa April 30, 2013.     REUTERS/Chris Wattie