CANADA FX DEBT-C$ dips modestly as greenback firms, crude slides

Thu Jun 11, 2015 4:55pm EDT
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(Updates throughout with strategist comment, details, closing
    * Canadian dollar at C$1.2275, or 81.47 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, June 11 (Reuters) - The Canadian dollar slipped
against the greenback on Thursday as a stronger U.S. currency,
bolstered by economic data, also dampened the price of oil.
    The U.S. dollar recouped some of Wednesday's losses against
a basket of currencies, buoyed by a bounce in U.S. retail sales
in May. Weekly U.S. jobless claims ticked up more than expected,
however, but remained at a healthy level. 
    "We're seeing the Canadian dollar back off a little and that
has ... more to do with U.S. dollar moves today," said Lennon
Sweeting, currency strategist at USForex.
    Market participants have been focused on U.S. economic data
to help guide expectations on when the Federal Reserve might 
raise rates. Recent numbers have suggested a 2015 rate hike is
likely, with September expected.
    The Canadian dollar was at C$1.2275 to the
greenback, or 81.47 U.S. cents, softer than Wednesday's close of
C$1.2262, or 81.55 U.S. cents. The currency traded between
C$1.2253 and C$1.2355 during the session.
    "Overall, I do think there is going to be further weakness
for the Canadian dollar regardless of crude pricing, or Bank of
Canada policy," said Sweeting. "The way the market appears to be
trading is it really is circling around the U.S. Fed. I think
that's what's really going to dominate volatility."
    The price of crude, a key Canadian export, snapped its
two-day rally amid the stronger U.S. dollar with investors
taking  profits. 
    U.S. crude settled down 66 cents, or 1 percent, at
$60.77, while Brent settled down 59 cents, or about 1
percent, at $65.11 a barrel.
    Overseas, the New Zealand dollar sank to a five-year low
against the greenback after the Reserve Bank of New Zealand
surprised markets with an interest rate cut and suggested more
easing could follow. 
    Sweeting said this may have potentially added some pressure
to the loonie, given the commodity correlation between the two
currencies, but said the Canadian economy was performing fairly
well, overall.
    In Canada, industrial capacity use fell in the first quarter
from the previous quarter, pulled lower in part by weaker
manufacturing, while new home prices in Canada edged up in
April, in line with forecasts.  
    Canadian government bond prices rose across the maturity
curve, with two-year rising 9.1 Canadian cents to
yield 0.658 percent and benchmark 10-year gaining 84
Canadian cents to yield 1.816 percent.
    The Canada-U.S. two-year bond spread was -5.9 basis points,
while the 10-year spread was -56.5 basis points.

 (Reporting by Solarina Ho; Editing by Meredith Mazzilli and
Diane Craft)