CANADA FX DEBT-C$ resumes rally on Fed uncertainty, oil's pause

Wed Oct 14, 2015 4:47pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* Canadian dollar at C$1.2922, or 77.39 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds quotes, background, updates prices)
    By Leah Schnurr
    OTTAWA, Oct 14 (Reuters) - The Canadian dollar strengthened
by nearly 1 percent against the greenback on Wednesday, helped
by a stabilization in oil prices and as investors second-guessed
whether the Federal Reserve will raise interest rates this year
as had been anticipated.
    The loonie resumed its recent rally after a round of
disappointing U.S. economic data, as well as worries about a
slowdown in the Chinese economy added to some analysts' views
that the Fed might wait until next year to begin lifting rates.
 
    Meanwhile, the Fed's Beige Book of anecdotal information on
business activity showed that labor markets continued to tighten
but there was little impact on wage growth. 
    Recent comments from Fed policymakers have also suggested a
split within the central bank. 
    "The tone from some of the speakers that were out yesterday
and Monday is painting a picture that suggests they're in no
rush down stateside," said Don Mikolich, executive director of
foreign exchange at CIBC World Markets. 
    The uncertainty surrounding the Fed's timeline sent the U.S.
dollar to a seven-week low against a basket of currencies 
to the benefit of the Canadian dollar. The move helped the
loonie break through technical resistance around the C$1.30
area.
     The Canadian dollar ended the North American
trading session at C$1.2922 to the greenback, or 77.39 U.S.
cents, stronger than the Bank of Canada's official close of
C$1.3019, or 76.81 U.S. cents.
    The loonie has gained nearly 3 percent this month so far,
though it is still down more than 11 percent since the start of
the year as it has been hit by the drop in oil prices and two
interest rate cuts from the Bank of Canada.
    But a pause in oil's decline on Wednesday gave the Canadian
dollar some respite. The loonie has been highly sensitive to the
price of oil, which is a major export for Canada. 
    Crude oil settled down 2 cents at $46.64 a barrel as it
remained pressured by concerns of a growing supply glut. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 8 Canadian cents
to yield 0.521 percent and the benchmark 10-year 
jumping C$1.18 to yield 1.392 percent.
    The Canada-U.S. two-year bond spread was -3.60 basis points,
while the 10-year spread was -58.2 basis points.

 (Editing by Diane Craft)