CANADA FX DEBT-C$ touches two-week high as oil prices jump

Thu Aug 4, 2016 4:34pm EDT
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(Adds strategist comment, updates prices to close)
    * Canadian dollar settles at C$1.3022, or 76.79 U.S. cents
    * Bond prices higher across maturity curve

    By Alastair Sharp
    TORONTO, Aug 4 (Reuters) - The commodity-linked Canadian
dollar touched its strongest level against its U.S. counterpart
in more than two weeks on Thursday as oil prices bounced, while
attention also turned to key economic data due on Friday. 
    The gain came against a broadly stronger greenback as the
Bank of England cut interest rates and launched stimulus
measures, boosting global stocks and hammering the British
    "It's a commodity story, and oil in particular is picking
up," said Mark Chandler, head of Canadian fixed income and
currency strategy at Royal Bank of Canada. 
    Oil prices jumped almost 3 percent, with U.S. crude moving 
firmly above the $40-per-barrel mark on short-covering and after
a modest stockpile drop at the delivery hub for U.S. crude
    The Canadian dollar ended the day trading at
C$1.3022 to the greenback, or 76.79 U.S. cents, stronger than
Wednesday's close of C$1.3071, or 76.51 U.S. cents.
    The currency's strongest level of the session was C$1.2997,
the first time it ducked under C$1.30 since July 19, while its
weakest was C$1.3089.
    Canadian government bond prices were higher across the
maturity curve. The two-year price firmed 3.5
Canadian cents to yield 0.541 percent and the benchmark 10-year
 climbed 45 Canadian cents to yield 1.050 percent.
    The curve flattened as the spread between the two-year and
10-year yields narrowed by 3.1 basis points to 50.9 basis
points, indicating outperformance for longer-dated maturities.
    Traders were braced for U.S. monthly jobs data for July due
on Friday, which may shift expectations for U.S. interest rates.
Canada's international trade data for June and employment report
for July are also to be released on Friday. 
    "If there is another disappointment on the trade front I
could see that sending the Canadian dollar weaker," RBC's
Chandler said.
    Canada's trade deficit widened to its second largest on
record in May, exceeded only by the revised April number.

 (Additional reporting by Fergal Smith; Editing by Leslie Adler)