CANADA FX DEBT-C$ softens ahead of key trade data as oil remains volatile
(Adds analyst comment, closing figures, details) * Canadian dollar at C$1.3271, or 75.35 U.S. cents * Bond prices mostly lower across maturity curve By Solarina Ho TORONTO, Sept 2 (Reuters) - The Canadian dollar eased against the U.S. dollar on Wednesday as it struggled to advance on the back of stronger crude prices and as investors eyed key July trade balance data due on Thursday. Market participants hope the trade numbers will bring more clarity on whether the impact of cheap crude has been contained as well as whether a soft Canadian dollar has helped stimulate other parts of the economy. "In order to get a sustained Canadian dollar rally, we need to see a sustained increase in exports," said Adam Button, currency analyst at ForexLive in Montréal. Economists polled by Reuters are currently expecting a C$1.3 billion trade deficit for July. Investors are currently split on whether the Bank of Canada could issue a third interest rate cut in the coming months and this week's data, which also includes employment figures for August due on Friday, could provide further direction. "Some optimism on the global economy is returning, but the overall outlook is deeply uncertain. Until that resolves, it will remain extremely difficult for the Canadian dollar to catch a bid," he added. The Canadian dollar lost 0.37 percent to finish at C$1.3271 to the greenback, or 75.35 U.S. cents, weaker than the Bank of Canada's official close of C$1.3222, or 75.63 U.S. cents on Tuesday. The loonie retreated to C$1.3325 earlier in the session, not far from the 11-year lows touched last week, as crude prices sank nearly 5 percent at one point. "The defining feature of the Canadian dollar right now is its inability to rally when oil prices rise and trading today especially underscores that," said Button. "When oil stormed back, the Canadian dollar only gained marginally." Investors have struggled to pin a bottom for crude prices, which tumbled to multiyear lows last week before rallying 25 percent over three days. The volatility has continued this week with further swings in both directions. Canadian government bond prices were mostly lower across the maturity curve, with the two-year down half a Canadian cent to yield 0.420 percent and the benchmark 10-year falling 28 Canadian cents to yield 1.457 percent. The Canada-U.S. two-year bond spread was -29.2 basis points, while the 10-year spread was -73.4 basis points. (Reporting by Solarina Ho, editing by G Crosse)
© Thomson Reuters 2017 All rights reserved.