CANADA FX DEBT-C$ gains on stronger dollar despite oil fall

Thu Jun 30, 2016 5:00pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

(Adds currency trader comment, details; updates prices to
close)
    * Canadian dollar settles at C$1.2917, or 77.42 U.S. cents
    * Bond prices higher across the maturity curve
    * 10-year yield touches lowest since Feb. 12

    By Alastair Sharp
    TORONTO, June 30 (Reuters) - The Canadian dollar gained
against a broadly stronger U.S. currency on Thursday, breaking
from its typical connection with oil prices, as some investors
saw value in its distance from tumult following Britain's vote
to leave the European Union.    
    The gain came despite falling prices for oil, a major
Canadian export, and domestic data that showed the economy
notching only modest growth after a recent run of losses.
    Currency markets were shaken by last week's so-called Brexit
vote, and sterling and the euro lost ground again on Thursday
after Bank of England Governor Mark Carney said he saw the need
for more stimulus and a Bloomberg report hinted at more European
Central Bank easing.
    "We're in the camp that thinks the Canadian dollar is a
little bit of a safe haven, which is uncommon to say for a
commodity currency," said Blake Jespersen, a managing director
for foreign exchange sales at BMO Capital Markets. 
    "Canada has very little trade with the UK and on a relative
basis now our yields look OK."
    The Canadian dollar settled at C$1.2917 to the
greenback, or 77.42 U.S. cents, stronger than Wednesday's close
of C$1.2975, or 77.07 U.S. cents.
    Its strongest level was C$1.2914, while its weakest was
C$1.3016.
    Jespersen said the currency will likely trade between C$1.27
and C$1.33 in the medium term as global uncertainties limit any
strength and excessive weakening prompts short U.S. dollar
positions.
    The Canadian economy grew by just 0.1 percent in April from
March, Statistics Canada said. It matched analysts' expectations
after two straight months of declines but cleared the way for a
sickly second quarter on the back of the devastation caused by
major Alberta wildfires. 
    "It is quite easy to get a 1 to 2 percent contraction in the
second quarter," said Derek Holt, head of capital markets
economics at Scotiabank, which would be a much deeper
contraction than the Bank of Canada has signaled.    
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 7.3
Canadian cents to yield 0.517 percent and the benchmark 10-year
 rising 65 Canadian cents to yield 1.060 percent.
    Canada's 10-year yield fell as low as 1.044 percent in the
session, its lowest level since Feb. 12. 
    Canada, the United States and Mexico on Wednesday mounted a
fierce defense of free trade, vowing to deepen economic ties
despite an increasingly acrimonious debate about the value of
globalization. 

 (Additional reporting by Fergal Smith; Editing by Bill Trott
and James Dalgleish)