CANADA FX DEBT-C$ strengthens as oil rallies, stocks advance

Tue Aug 23, 2016 4:48pm EDT
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(Adds analyst comments, updates prices)
    * Canadian dollar at C$1.2910, or 77.46 U.S. cents
    * Bond prices slightly higher across flatter maturity curve

    By Fergal Smith
    TORONTO, Aug 23 (Reuters) - The commodity-linked Canadian
dollar firmed against its U.S. counterpart on Tuesday as oil
rallied and stocks edged higher.
    Oil rallied after Reuters reported that Iran was sending
positive signals that it may support joint OPEC action to prop
up the market. U.S. crude oil futures settled up 69 cents
at $48.10 a barrel. 
    The oil-related news helped push the Canadian dollar through
resistance around C$1.2900, although it pared some gains as the
market turned its attention to Federal Reserve Chair Janet
Yellen's speech in Jackson Hole on Friday, said Jack Spitz,
managing director of foreign exchange at National Bank
    Doubts that Fed's Yellen will be able to convince financial
markets that she can steer a divided U.S. central bank to raise
interest rates at least once in 2016 weighed on the U.S. dollar
    Gains for stocks were supportive of the risk-sensitive
Canadian dollar, Spitz said.    
    The Canadian dollar ended at C$1.2910 to the
greenback, or 77.46 U.S. cents, stronger than Monday's close of
C$1.2950, or 77.22 U.S.
    The currency's strongest level of the session was C$1.2859,
while its weakest was C$1.2947.
    On Monday, the loonie touched its weakest in one week at
    Gains for the Canadian dollar came after
stronger-than-expected domestic wholesale trade data on Monday.
    Still, recent retail sales data disappointed and Canada's
economy is expected to contract in the second quarter after a
wildfire in Alberta cut oil production. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year bond down 0.5 of a
Canadian cent to yield 0.555 percent and the benchmark 10-year
 rising 3 Canadian cents to yield 1.022 percent.
    The curve flattened, as the spread between the 2- and
10-year yields narrowed by 0.6 of a basis point to 46.7 basis
points, its narrowest since June 2008, indicating outperformance
for longer-dated maturities.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and James