CANADA FX DEBT-C$ slips to six-week low as data fuels US$ rally

Tue May 26, 2015 4:59pm EDT
 
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(Adds closing figures, strategist comment, details)
    * Canadian dollar at C$1.2427, or 80.47 U.S. cents
    * Bond prices mostly higher across maturity curve

    By Solarina Ho
    TORONTO, May 26 (Reuters) - The Canadian dollar dipped to
its weakest level against the greenback in six weeks on Tuesday,
as oil prices fell and the U.S. dollar extended gains on upbeat
economic data that supported expectations for a U.S. interest
rate hike later this year.
    The U.S. dollar rallied to a one-month high against a basket
of currencies after a barrage of economic data, including a
report that showed a second-straight monthly increase in U.S.
business investment spending plans in April. 
 
    Other data on Tuesday showed a rise in U.S. consumer
confidence and unexpectedly strong gains last month in new home
sales.
    Tuesday kicked off a jam-packed calendar this week of U.S.
economic numbers that could have implications for Federal
Reserve policy. A lackluster first quarter and slower start to
the second had raised speculation on whether a U.S. rate hike
could be pushed beyond 2015.
    The Bank of Canada, meanwhile, will issue its latest rate
decision on Wednesday, while first-quarter economic growth data
will be released on Friday.
    "Part of me feels like there's a growing sentiment that the
Bank of Canada, who aren't expected to move anything tomorrow
... pares back just a little bit of expectation on what Q2 is
going to bring for us," said Amo Sahota, director at Klarity FX
in San Francisco.
    "The market is sniffing at that and been okay with (today's
Canadian dollar move) ... if they are more dovish, this will be
part of the journey to" weaken further, Sahota said.
    The Canadian dollar finished at C$1.2427 against
the U.S. dollar, or 80.47 U.S. cents, more than a cent weaker
than the Bank of Canada's official close on Monday of C$1.2313,
or 81.21 U.S. cents.
    At one point, the currency touched C$1.2448, a level not
seen since April 15. The loonie had traded as firm as C$1.2304
overnight.
    The strong U.S. dollar also helped pull crude prices down
more than 2 percent, as did worries that the recent rally could
keep U.S. producers more active.
    U.S. crude settled down 2.83 percent to $58.03, while
Brent crude lost 2.75 percent to settle at $63.72. 
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year price up 5
Canadian cents to yield 0.647 percent and the benchmark 10-year
 rising 71 Canadian cents to yield 1.704 percent.
    The Canada-U.S. two-year bond spread was 3.3 basis points,
while the 10-year spread was -43.7 basis points.

 (Reporting by Solarina Ho; editing by Peter Galloway and G
Crosse)