CANADA FX DEBT-C$ strongest close since rate cut as oil prices rise

Tue Feb 17, 2015 4:30pm EST
 
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(Adds analyst comment, details, updates prices to close)
    * Canadian dollar at C$1.2374, or 80.81 U.S. cents
    * Bond prices lower across the maturity curve

    By Alastair Sharp
    TORONTO, Feb 17 (Reuters) - The Canadian dollar on Tuesday
hit its strongest closing level against its U.S. counterpart
since a surprise January rate cut, helped by crude oil prices
breaching a 2015 peak.
    The loonie, as Canada's currency is colloquially known, has
struggled against the greenback recently on the back of slumping
crude coupled with the Bank of Canada rate cut.
    The currency again took oil's lead on Tuesday despite
housing data that suggested Canada's prolonged property boom may
finally be ending, which could prompt more accommodative action
from the Bank of Canada. 
    "There are signs the Canadian housing market is cracking,
but at the moment the market is fixated on the oil trade," said
Adam Button, a currency analyst at ForexLive in Montreal.  
    Oil's rise - the U.S. crude benchmark brushed off a slow
start to settle above $53 a barrel while Brent touched a 2015
high - helped reinvigorate the currency of Canada, a major crude
producer, although it may not be enough to support it over the
longer term, another strategist said. 
    "With the degree that the Canadian dollar collapsed, almost,
in January, there's some risk that was overshooting ... and we
could spend the next few weeks consolidating or even reversing
before the trend reasserts itself," said Adam Cole, head of
foreign exchange strategy at Royal Bank of Canada.
    Investors did not seem to panic as Greece and its eurozone
creditors broke off debt talks without a deal.  
    "Markets are quite risk-tolerant today," Cole said. "It's
hard to put a finger on (the reason for) it."
    The Canadian dollar ended the session changing
hands at C$1.2374 to the greenback, or 80.81 U.S. cents,
stronger than Friday's official Bank of Canada close of
C$1.2461, or 80.25 U.S. cents. Trading was limited on Monday due
to North American holidays, when the loonie closed at C$1.2465,
according to Thomson Reuters data.
    ForexLive's Button said if U.S. oil breaks through $55 a
barrel, the loonie could rise to C$1.20. But if a strong June
rate hike hint is found in the minutes of the U.S. Federal
Reserve's last meeting, due to be published on Wednesday, the
Canadian currency could weaken to C$1.30, he said.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 6.5 Canadian
cents to yield 0.461 percent and the benchmark 10-year
 down 75 Canadian cents to yield 1.502 percent.

 (Editing by Lisa Von Ahn)