CANADA FX DEBT-C$ strengthens as oil climbs above $50 a barrel

Tue Jun 7, 2016 5:22pm EDT
 
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(Adds analyst quotes and details on Ivey PMI, updates prices)
    * Canadian dollar at C$1.2771, or 78.30 U.S. cents
    * Loonie hit its strongest since May 4 at C$1.2753
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, June 7 (Reuters) - The Canadian dollar strengthened
to a one-month high against its U.S. counterpart on Tuesday
after oil prices climbed above $50 a barrel and bets for U.S.
interest rate hikes were lowered following disappointing U.S.
jobs data last week.
    The loonie's gains came after Federal Reserve Chair Janet
Yellen on Monday called the latest U.S. jobs numbers
disappointing and opted not to repeat her recent message that
rates could rise again in the coming months. 
    "We had a lot of people that were long U.S. dollars and they
are exiting their positions, so that's exacerbating the move
towards a higher loonie," said Rahim Madhavji, president of
KnightsbridgeFX.com.
    Oil prices reached 2016 highs on expectations of a domestic
stockpile draw and worries about global supply shortfalls from
attacks on Nigeria's oil industry. U.S. crude settled up 67
cents at $50.36 a barrel, the first time it had settled above
$50 in almost a year. 
    The Canadian dollar closed at C$1.2771 to the
greenback, or 78.30 U.S. cents, stronger than Monday's official
close of C$1.2807, or 78.08 U.S. cents.
    The currency's weakest level of the session was C$1.2838,
while it touched its strongest since May 4 at C$1.2753.
    The Canadian dollar's rally may have "some legs" in the
short-term said Madhavji, but he doubted it would revisit the
10-month high it reached a little more than one-month ago at
C$1.2461. 
    The pace of purchasing activity in Canada slowed in May as
measures of employment and inventories both contracted,
according to Ivey Purchasing Managers Index data. 
    Canadian employment data for May will be released at the end
of the week. The report comes after a wildfire last month cut
production in Alberta's oil sands region.
    The Bank of Canada has said it expects damage from the
wildfires to shave 1.25 percentage points off economic growth in
the second quarter. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 4 Canadian
cents to yield 0.526 percent and the benchmark 10-year
 rising 20 Canadian cents to yield 1.217 percent.
    On Friday, the 10-year yield hit its lowest in nearly two
months at 1.175 percent.

 (Reporting by Fergal Smith; Editing by Andrew Hay)