CANADA FX DEBT-C$ rebounds on oil price, China relief; jobs data in focus

Thu Jul 9, 2015 4:47pm EDT
 
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(Adds strategist comment, closing figures, crude oil details)
    * Canadian dollar at C$1.2707 or 78.70 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, July 9 (Reuters) - The Canadian dollar rose on
Thursday, rebounding from recent sharp losses against the
greenback as crude oil prices recovered and sentiment in global
markets brightened.
    The price of oil, a key Canadian export, climbed nearly 3
percent after the Chinese stock market stabilized from its
recent plunge and nuclear talks with Iran, which could allow the
oil producer to export more crude, remained uncertain.
   
    Many strategists, however, still expect the Canadian dollar
to weaken further going forward, particularly due to growing
expectations that the Bank of Canada may cut interest rates as
early as next week. These investors view the loonie's bounce as
temporary, and an opportunity to buy U.S. dollars.
    "Commodities have recovered a little bit today; risk
appetite has recovered a little bit today," said Greg Anderson,
global head of foreign exchange strategy at BMO Capital Markets
in New York, adding that some market participants long on
USD/CAD were likely taking some profit as well, scaling back
bets ahead of Friday's jobs data in case the figures come out
better than expected.
    The Canadian dollar, which outperformed most of its
key currency counterparts, finished at C$1.2707 to the U.S.
dollar, or 78.70 U.S. cents. That was stronger than the Bank of
Canada's official close on Wednesday of C$1.2740, or 78.49 U.S.
cents.
    The loonie, which has fallen nearly 4 percent since
mid-June, traded between C$1.2665 and C$1.2745 during the
session.
    Also providing some loonie support on Thursday was data that
showed new home prices in Canada rose by a greater-than-expected
0.2 percent in May from April. 
    "Over the longer term I still expect it to break C$1.30,"
said Anderson, citing the combined factors of an increasingly
possible Bank of Canada rate cut next week, and the likelihood
of a Federal Reserve rate hike later this year.
    Canadian employment data for June is due at 8:30 a.m. EDT on
Friday and will be the final piece of closely watched economic
data before the Bank of Canada's rate decision next Wednesday.
 
    Canadian government bond prices were generally lower across
the maturity curve, with the two-year price down 6
Canadian cents to yield 0.459 percent and the benchmark 10-year
 falling 63 Canadian cents to yield 1.584 percent.
    The Canada-U.S. two-year bond spread was -12.6 basis points,
while the 10-year spread was -73.0 basis points.

 (Reporting by Solarina Ho; editing by Peter Galloway and David
Gregorio)