CANADA FX DEBT-C$ gains capped by weak oil price, domestic data

Thu Nov 19, 2015 5:12pm EST
 
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* Canadian dollar at C$1.3297, or 75.20U.S. cents
    * Bond prices higher across the maturity curve

    By Alastair Sharp
    TORONTO, Nov 19 (Reuters) - The Canadian dollar gained
against a broadly weaker U.S. dollar on Thursday, although the
loonie's strength was limited by a fall in U.S. crude oil prices
and an unexpected dip in Canadian wholesale trade data for
September.
    The U.S. Federal Reserve has signaled a likely rate increase
next month, but also that it would proceed gradually on further
hikes depending on the economy's performance. 
    The Canadian dollar settled at C$1.3297 to the
greenback, or 75.20 U.S. cents, stronger than Wednesday's
official close at C$1.3318, or 75.09 U.S. cents.
    The currency could strengthen further in the short term but
will likely weaken to nearer C$1.37 to the greenback as the
impending U.S. rate hike nears, according to David Bradley,
director of foreign exchange trading at Scotiabank. 
    "It feels like maybe the market is a little more vulnerable
on the downside in dollar/Canada - we could test the low
C$1.32s," he said. "But I think it is inevitable that eventually
the Canadian dollar weakens off and we see dollar/Canada take
out the highs we saw earlier this year."
    Bradley noted that any surprises in inflation and retail
sales data due on Friday could lead to intra-day volatility.
    Canadian wholesale trade fell by 0.1 percent in September
from August, led by the motor vehicle and building supplies
sectors, data from Statistics Canada showed on Thursday. That
compared with an expected 0.3 percent gain in a Reuters poll.
 
    The currency's strongest level of the session was C$1.3247,
while its weakest was C$1.3314.
    U.S. crude prices settled down 0.5 percent to $40.54,
while Brent added 0.3 percent to $44.27. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 4 Canadian
cents to yield 0.619 percent and the benchmark 10-year
 rising 24 Canadian cents to yield 1.623 percent.
    The Canada-U.S. two-year bond spread widened to -27.7 basis
points, while the 10-year spread was at -62.4 basis points.
    

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and Dan Grebler)