CANADA FX DEBT-C$ weakens to 1-week low as risk appetite wanes, oil falls

Fri Sep 9, 2016 4:52pm EDT
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(Adds analyst quote, updates prices)
    * Canadian dollar ends at C$1.3037, or 76.70 U.S. cents
    * Loonie touches its weakest since Sept. 2 at C$1.3053
    * Canadian bond prices lower across steeper maturity curve
    * 10-year yield touches its highest in six weeks at 1.164

    By Fergal Smith
    TORONTO, Sept 9 (Reuters) - The Canadian dollar weakened to
a one-week low against its U.S. counterpart on Friday as
increased risk aversion and lower oil prices offset
stronger-than-expected domestic jobs data.    
    Canada's economy added 26,200 jobs in August, recovering
some of the positions lost in recent months. 
    "I don't know that it should change anyone's broader opinion
on the Canadian economy, but it's still encouraging," said
Andrew Kelvin, senior rates strategist at TD Securities.
    The implied probability of a Bank of Canada interest rate
cut this year was little changed after the data at around 10
percent, overnight index swaps data showed. 
    U.S. stocks dropped as investors were rattled by a nuclear
test by North Korea and comments by Federal Reserve officials
that hinted at a U.S. interest rate hike.    
    "The Canadian dollar is doing what most of the other
currencies are doing, which is losing ground against the U.S.
dollar," said Daniel Katzive, head of FX strategy North America
at BNP Paribas.
    Risk-sensitive commodity exporter currencies such as the
Canadian dollar have weakened more than some of the core
currencies as expectations rose that the Fed will raise interest
rates and yield curves steepened, Katzive added.
    Steepening in the yield curves of core economies, such as
the U.S. and Germany, came after the European Central Bank on
Thursday kept its policy stance unchanged, while the Bank of
Japan is studying several options to steepen its yield curve.
    U.S. crude settled $1.74 lower at $45.88 a barrel.
    The Canadian dollar ended at C$1.3037 to the
greenback, or 76.70 U.S. cents, weaker than Thursday's close of
C$1.2928, or 77.35 U.S. cents.
    The currency's strongest level of the session was C$1.2912,
while it touched its weakest since Sept. 2 at C$1.3053.
    Losses for the loonie came after a more dovish-than-expected
statement from the Bank of Canada on Wednesday. 
    Speculators pared bullish bets on the Canadian dollar,
Commodity Futures Trading Commission data showed. Net long
Canadian dollar positions dipped to 20,905 contracts in the week
ended Sept. 6 from 22,400 contracts in the prior week.
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year bond down 2.5 Canadian
cents to yield 0.583 percent and the benchmark 10-year
 falling 64 Canadian cents to yield 1.153 percent.
    The 10-year yield touched its highest since July 27 at 1.164

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and Chris