CANADA FX DEBT-C$ snaps rally on technical move, oil price retreat

Wed Oct 7, 2015 5:14pm EDT
 
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(New throughout, adds details and strategist comment, updates
figures to close)
    * Canadian dollar at C$1.3065 or 76.54 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, Oct 7 (Reuters) - The Canadian dollar fell on
Wednesday, breaking its five-day winning streak against the U.S.
dollar and hitting a key technical level as the price of oil, a
major Canadian export, fell in volatile trading.
    Earlier in the session, the loonie tracked early gains in
oil prices and bounced to levels not seen in nearly two months,
but momentum stalled at C$1.2972.
    "For me it's more of a technical story. The C$1.2950 to
C$1.2970 area is quite significant...It's a key psychological
support level for USD/CAD, so it just offered a good opportunity
for people to buy the dip again," said Mazen Issa, senior
foreign exchange strategist with TD Securities in New York.
    Issa said the currency pair was due for a correction, noting
it should have been trading closer to C$1.28 and C$1.30 since
the September Federal Reserve meeting.
    "We didn't really get that. It took the (September U.S.)
payrolls report to validate that the Fed (rate hike) is really
off the table," said Issa. TD is forecasting March as the month
the Fed will raise interest rates.
    The Canadian dollar ended the session at C$1.3065
to the greenback, or 76.54 U.S. cents, weaker than the Bank of
Canada's official close of C$1.3027, or 76.76 U.S. cents on
Tuesday.
    The currency traded between C$1.2972 and C$1.3073. Just last
week, it stumbled to an 11-year low of C$1.3457. 
    Earlier, crude prices pushed higher on evidence of
tightening market conditions. But oil slid after U.S. government
data showed a large crude inventory build, catching traders by
surprise. The price reversal ended a three-day rally that saw
Brent closing above $50 a barrel on Tuesday for the first time
in a month and U.S. light crude approaching $50. 
    A Reuters poll indicated the loonie will likely weaken in
the coming months, due to volatile crude prices, the upcoming
Canadian federal election, and expectations the Fed will
eventually hike interest rates. 
    In other data, the value of Canadian building permits issued
in August fell by 3.7 percent from July, far different than the
0.8 increase economists polled by Reuters had predicted.
 
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year price off 4.5
Canadian cents to yield 0.531 percent and the benchmark 10-year
 slipping 33 Canadian cents to yield 1.455 percent.
    The Canada-U.S. two-year bond spread was -9.8 basis points,
while the 10-year spread was -61.1 basis points.

 (Reporting by Solarina Ho; Editing by Andrea Ricci and David
Gregorio)