CANADA FX DEBT-C$ firms on crude rally, soft greenback

Wed May 6, 2015 4:37pm EDT
 
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(Adds strategist comment, closing figures)
    * Canadian dollar at C$1.2040 or 83.06 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, May 6 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday as crude prices surged
to 2015 highs and the U.S. dollar stumbled on soft economic
data, but gains were well-off highs hit earlier in the session.
    The big oil and greenback drivers appeared to overshadow any
market reaction from an historic election in the oil-producing
province of Alberta, in which the left-wing New Democrats won a
crushing victory, ending the Progressive Conservatives' 44-year
hold on power. 
    "The election is in the wings and removed from price action
in the Canadian dollar," said Scott Smith, senior market analyst
at Cambridge Global Payments in Calgary.
    "I don't think it will affect things on a day to day level,
but is an overall theme going forward. It will raise some
caution in terms of generating further investments in the energy
industry for Canada."
    The price of crude, a significant Canadian export, has
rebounded over the last month and gathered more steam on
Wednesday after the American Petroleum Institute (API) reported
that U.S. crude stocks fell. But prices came off their highs as
market participants took profits. 
    U.S. crude was up 0.4 percent to $60.66 after hitting
$62.58 a barrel earlier in the session, while Brent crude
 was unchanged at $67.55 after touching $69.63.
    The Canadian dollar finished at C$1.2040 to the
greenback, or 83.06 U.S. cents, stronger than the Bank of
Canada's official close of C$1.2072, or 82.84 U.S. cents, on
Tuesday.
    The loonie had traded between C$1.1940, its strongest level
since right before the Bank of Canada's surprise interest rate
cut in January, and C$1.2087 during the session.
    "People have a hard time selling U.S. dollars at this level
because the Canadian dollar is fairly overvalued," said Smith.
"From a technical perspective, what we saw today was a bounce
off a very strong technical level."
    The greenback retreated after data showed private employers
added 169,000 jobs in April, the fewest since January 2014 and
far below economists' forecast for 200,000. This was the latest
set of data that supported expectations that the Federal Reserve
will postpone a rate hike. 
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year price down 1
Canadian cent to yield 0.698 percent and the benchmark 10-year
 falling 70 Canadian cents to yield 1.815 percent.
    The Canada-U.S. two-year bond spread narrowed to 5.9 basis
points, while the 10-year spread was -43.0 basis points.

 (Reporting by Solarina Ho; Editing by Peter Galloway)