CANADA FX DEBT-C$ bounces despite crude oil headwind

Mon Nov 9, 2015 4:36pm EST
 
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(Adds analyst quote, updates prices)
    * Canadian dollar at C$1.3275 or 75.33 U.S. cents
    * Bond prices mixed across the maturity curve

    By Fergal Smith
    TORONTO, Nov 9 (Reuters) - The Canadian dollar managed a
modest bounce against the U.S. dollar on Monday, as the
greenback paused after recent gains in the face of fresh concern
about the global growth outlook.
    It is "essentially a story of consolidation and I think
investors keeping one eye on equity markets today and another
eye on where they can probably start to get long U.S. dollars
again," said Shaun Osborne, chief currency strategist at
Scotiabank.
    The Canadian dollar hit a five-week low of C$1.3318 on
Friday after strong U.S. jobs data raised the prospect of a
December rate hike from the Federal Reserve, overshadowing a
solid, but election boosted, Canadian jobs gain.
    "If we do get to lift off (of the U.S. interest rate)," said
Osborne, "which I think we will, in December, then there is
probably a fair bit more dollar strength to come here, we're not
really priced at all for even a very slow burn tightening for
next year."
    The Canadian dollar ended at C$1.3275 to the
greenback, or 75.33 U.S. cents. That was stronger than Friday's
close of C$1.3296, or 75.21 U.S. cents.
    Weak Chinese trade data raised concern about the global
growth outlook, with both exports and imports falling more than
expected. 
    But comments from the normally dovish president of the
Boston Fed, Eric Rosengren, helped sustain momentum toward a
December rate hike. 
    Canadian housing starts pulled back in October, falling to
198,065 from an upwardly revised 231,304 in September, although
close to expectations. 
    Weaker oil prices weighed on Canada's economic outlook, with
U.S. crude oil finishing down 1 percent at $43.87, while
Brent crude lost 0.34 percent to $47.26.      
    Nonetheless, expectations for another rate cut from the Bank
of Canada have been almost fully unwound, with the market
implying nearly 10 basis points in tightening through the end of
2016, as calculated by Reuters. 
    "The Bank would probably like to think that 0.5 (percent) is
a hard floor for rates at this point," said Osborne, adding
"they're expecting the exchange rate to do some of the heavy
lifting for them."
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up 1 Canadian
cent to yield 0.672 percent and the benchmark 10-year
 falling 9 Canadian cents to yield 1.725 percent.
    The Canada-U.S. two-year bond spread was -21.8 basis points,
while the 10-year spread was -62.8 basis points.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Chris
Reese)