CANADA FX DEBT-C$ slides as China's surprise devaluation hits crude
(Adds details of trading, closing levels, NBF strategist comments) * Canadian dollar at C$1.3104, or 76.31 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Aug 11 (Reuters) - The Canadian dollar stumbled on Tuesday, falling almost 1 percent against the greenback, its biggest one-day loss in nearly a month, as oil prices took a beating following China's surprise move to devalue its currency. The yuan had its biggest decline in more than two decades after the Chinese central bank devalued it by nearly 2 percent overnight, China's latest attempt to bolster its economy following a string of poor economic data. China is one of the world's largest natural resource consumers, and the move triggered a selloff in dollar-priced commodities, such as crude, which is a key Canadian export. "The Canadian dollar, along with other commodity block currencies ... are getting swept up," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "This is the knee-jerk. It's much too early to assess whether or not this is the beginning of a competitive devaluation or whether this is a one-off revaluation of the Chinese yuan." The Canadian dollar, which meaningfully broke through C$1.31 in intraday trading, finished the session at C$1.3104 to the U.S. dollar, or 76.31 U.S. cents, reversing Monday's more than 1 percent gain, when the currency officially closed at C$1.3001, or 76.92 U.S. cents. It has tumbled more than 20 percent in a little over a year, and traded between C$1.2996 and C$1.3150 on Tuesday. A slowdown in China's economy, which is still expected to grow by around 7 percent this year, has been a key driver for oil's plunge over the past year along with rising global supplies. Oil prices sank more than 4 percent on Tuesday. The move should not derail the Federal Reserve's plan to tighten monetary policy, said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. "It's a big move from China's perspective, but a 2 percent move in the currency is not a big one from a global perspective. You get two percent moves in most floating currencies on a somewhat regular basis, especially these days," he said. Canadian government bond prices were higher across the maturity curve, with the two-year price up 7.5 Canadian cents to yield 0.422 percent and the benchmark 10-year rising 73 Canadian cents to yield 1.396 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and James Dalgleish)
© Thomson Reuters 2017 All rights reserved.