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