CANADA FX DEBT-C$ at strongest in a week as US$ retreats

Fri Oct 30, 2015 4:29pm EDT
 
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(Adds strategist comment, details, updates prices)
    * Canadian dollar at C$1.3075, or 76.48 U.S. cents
    * Bond prices little changed across maturity curve

    By Alastair Sharp
    TORONTO, Oct 30 (Reuters) - The Canadian dollar strengthened
sharply against a broadly weaker U.S. currency on Friday,
touching its strongest level in a week as traders rebalanced
their books at the end of the fiscal year for Canadian banks.
    The loonie, as Canada's currency is colloquially known, has
gained steadily over the last three days in part on crude oil
price gains. It added 0.7 percent for the week and 2 percent
over the course of October.
    "There are plenty of dollars moving around in different
directions," Brad Schruder, a director of foreign exchange sales
at BMO Capital Markets, said of Friday's trading. 
    "At the same time, I think the big dollar in and of itself
is about to go through a period of weakness, so I would suspect
that the Canadian dollar continues to do a little bit better
over the next few sessions," he said.
    The Canadian dollar settled at C$1.3075 to the
greenback, or 76.48 U.S. cents, compared with Thursday's close
of C$1.3167, or 75.95 U.S. cents.
    It moved in a wide range, as weak as C$1.3193 and as strong
as C$1.3056, its strongest point since Oct. 23.
    Investors are torn between those who expect the U.S. Federal
Reserve to start raising interest rates later this year and
those who feel economic weakness will force them to delay the
first hike until 2016. 
    "The wider theme I would say is towards a stronger U.S.
dollar on the heels of the Fed," said David Tulk, chief Canada
macro strategist at Toronto-Dominion Bank. "It's very much a
wait-and-see proposition at this stage."
    U.S. crude prices settled up 1.15 percent at $46.59 a
barrel, while Brent added 1.35 percent to $49.46. 
    The Canadian dollar gained against most key currencies,
although it was outperformed by fellow commodity-linked
currencies the Australian and New Zealand dollars.
    The yield curve on Canadian government bonds flattened, with
the two-year half a Canadian cent lower to yield
0.578 percent and the benchmark 10-year up a cent to
yield 1.544 percent. The 4-year, 5-year, and 7-year issues rose.
    The Canada-U.S. two-year bond spread was -15.8 basis points,
while the 10-year spread was -60.2 basis points.

 (Reporting by Alastair Sharp; Editing by Lisa Von Ahn and Tom
Brown)