CANADA FX DEBT-C$ gets lift from crude price jump, weak greenback

Thu Feb 12, 2015 4:58pm EST
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* Canadian dollar at C$1.2490 or 80.06 U.S. cents
    * Bond prices rise across the maturity curve

    By Solarina Ho
    TORONTO, Feb 12 (Reuters) - The Canadian dollar powered
higher against a globally weaker greenback on Thursday as crude
prices rose and weak U.S. retail sales data raised questions
about the timing of the Federal Reserve's next interest rate
    Prices for oil, a major Canadian export, bounced as industry
spending cuts and a weaker greenback offset jitters about record
supply levels. 
    The U.S. dollar, which had already weakened broadly
following a media report that the Bank of Japan saw further
monetary stimulus as counter-productive, was also hurt by
weaker-than-expected retail sales and jobless claims data. The
U.S. dollar index was down 0.5 percent so far in
February, on track for its first monthly loss in eight months.
    Market participants had predicted that lower gasoline prices
meant more money in consumers' pockets for spending but retail
sales data, which declined for the second straight month, have
shown otherwise. 
    "That's thrown a bit of a cautionary red flag up ... you
could see the Federal Reserve be a bit more cautious around when
they may look to raise rates," said Scott Smith, senior market
analyst at Cambridge Mercantile Group in Calgary.
    The market is currently expecting the U.S. central bank to
hike interest rates around mid-year but further weak U.S. data
could see the Fed push a decision back to later in the year.
    The Canadian dollar finished at C$1.2490 to the
U.S. dollar, or 80.06 U.S. cents, firmer than Wednesday's close
of C$1.2641, or 79.11 U.S. cents.
    Strategists said any strength in the Canadian dollar will be
short-lived, saying Bank of Canada comments this week that the
Canadian economy was operating below potential continued to
    As a backdrop, Germany, France, Russia and Ukraine agreed on
a deal on Thursday that offers a "glimmer of hope" for an end to
fighting in eastern Ukraine after marathon overnight talks.
    "There's a real spectrum of factors that, net-net, are, from
a global economic perspective, somewhat bullish," said Brad
Schruder, director of foreign exchange at BMO Capital Markets.
    "This retracement from yesterday when we almost broke
C$1.27, is probably more flow related than it was any
fundamental shift."
    Canadian manufacturing sales data for December are due on
Friday. If the data disappoints, the loonie strength could
unwind pretty quickly, Smith said. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 3 Canadian cents
to yield 0.421 percent, and the benchmark 10-year 
jumped 53 Canadian cents to yield 1.397 percent.

 (Reporting by Solarina Ho; Editing by Chizu Nomiyama,; Peter
Galloway and James Dalgleish)