CANADA FX DEBT-C$ strengthens to 3-week high as oil rallies

Thu Aug 11, 2016 4:27pm EDT
 
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(Adds analyst comments, updates prices)
    * Canadian dollar settles at C$1.2980, or 77.04  U.S. cents
    * Loonie touches its strongest since July 19 at C$1.2958
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, Aug 11 (Reuters) - The commodity-linked Canadian
dollar strengthened to a three-week high against its U.S.
counterpart on Thursday, as oil and stocks rallied.
    Oil rose after comments from the Saudi oil minister about
possible action to stabilize prices triggered a round of buying
and the International Energy Agency forecast crude markets would
tighten in the second half of 2016. 
    Other commodity-linked currencies also advanced, including
the Kiwi dollar after a smaller-than-expected
quarter-point cut from the Reserve Bank of New Zealand.
   
    Adding to support for the risk-sensitive Canadian dollar,
shares on Wall Street advanced, with all three major indices
closing at record highs as strong results from department store
chains and a surge in oil prices buoyed investor sentiment.
 
    The U.S. dollar rose against a basket of major
currencies. However, that followed two days of losses.
    Weak U.S. productivity data this week has undermined
confidence that the U.S. economy will be able to deliver on
strong growth, said Michael Goshko, a corporate risk manager at
Western Union Business Solutions.
    "It shoots (U.S.) rate expectations in the heart," he added.
    The Canadian dollar ended at C$1.2980 to the
greenback, or 77.04 U.S. cents, stronger than Wednesday's close
of C$1.3064, or 76.55 U.S. cents.
    The currency's weakest level of the session was C$1.3080,
while it touched its strongest since July 19 at C$1.2958.
    Some investors that were short Canadian dollars covered
those positions when C$1.3000 was breached, said Goshko.
    New home prices in Canada rose 0.1 percent in June from the
previous month, following a 0.7 percent monthly increase in May,
Statistics Canada said. On a year-over-year basis the index
increased 2.5 percent. 
    Canadian government bond prices were lower across the
maturity curve in sympathy with U.S. Treasuries. The two-year
 bond fell 6 Canadian cents to yield 0.538 percent and
the benchmark 10-year declined 38 Canadian cents to
yield 1.032 percent.
    On Wednesday, the 10-year yield had fallen below the 1
percent threshold for the first time in nearly four weeks.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Diane Craft)