CANADA FX DEBT-C$ strengthens to 10-day high as oil recovers

Fri Jul 29, 2016 4:50pm EDT
 
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(Adds analyst quote, details on CFTC data and Vancouver
property transfer tax, updates prices)
    * Canadian dollar ends at C$1.3056, or 76.59 U.S. cents
    * C$ touches its strongest since July 19 at 1.3002
    * C$ declines 1 percent for the month of July
    * Bond prices higher across the maturity curve
    * 10-year yield hits its lowest since July 14 at 1.023
percent

    By Fergal Smith
    TORONTO, July 29 (Reuters) - The Canadian dollar
strengthened to a 10-day high against its U.S. counterpart on
Friday as oil rose and a new property transfer tax in Vancouver
loomed, while data showing the U.S. economy grew far less than
expected offset weak domestic data.
    Oil prices recovered after a week-long selloff but still
finished the month nearly 15 percent lower. U.S. crude oil
futures settled up 46 cents at $41.60 a barrel. 
    "Flows due to the impending Vancouver real estate tax" added
to support for the Canadian dollar, said Adam Button, currency
analyst at ForexLive.
    British Columbia has introduced a new 15-percent property
transfer tax on foreign real estate buyers in Vancouver, one of
a series of new measures geared at increasing affordability in
the city's red-hot housing market. The new tax takes effect on
Aug. 2.    
    Canada's economy suffered its biggest one-month contraction
in May since March 2009 as wildfires in northern Alberta caused
a sharp drop in oil extraction, reinforcing expectations that
the economy shrank in the second quarter. 
    Still, resumption of oil production should help the economy
rebound "strongly" in the third quarter said Paul Ferley,
assistant chief economist at Royal Bank of Canada.
    The U.S. dollar fell against a basket of major
currencies after a round of modest monetary policy easing from
the Bank of Japan disappointed investors. This was followed by
the weaker-than-expected U.S. gross domestic product data.
  
    The Canadian dollar ended at C$1.3056 to the
greenback, or 76.59 U.S. cents, stronger than Thursday's close
of C$1.3161, or 75.98 U.S. cents.
    The currency's weakest level of the session was C$1.3185,
while it touched its strongest since July 19 at C$1.3002.
    The loonie declined 1 percent for the month of July.
    Speculators increased bullish bets on the Canadian dollar
for the fifth straight week, Commodity Futures Trading
Commission data showed. Net long Canadian dollar positions rose
to 23,180 contracts in the week ended July 26 from 22,068
contracts in the prior week.    
    Canadian government bond prices were higher across the
maturity curve in sympathy with U.S. Treasuries.
    The two-year bond rose 9 Canadian cents to yield
0.54 percent and the benchmark 10-year climbed 39
Canadian cents to yield 1.028 percent.
    The 10-year yield hit its lowest since July 14 at 1.023
percent.

 (Reporting by Fergal Smith; Editing by Jeffrey Hodgson and
Sandra Maler)