November 4, 2016 / 1:32 PM / 9 months ago

CANADA FX DEBT-C$ hits 8-month low as weak exports, lower oil weigh

3 Min Read

* Canadian dollar at C$1.3430, or 74.46 U.S. cents
    * Loonie touches its weakest since March 4 at C$1.3451
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, Nov 4 (Reuters) - The Canadian dollar weakened to
an eight-month low against its U.S. counterpart on Friday,
pressured by the weak trend in the country's exports and lower
oil prices, while a solid U.S. jobs gain supported the
greenback.
    The Canadian economy unexpectedly added tens of thousands of
jobs for the second month in a row in October, although all of
the increase was due to new part-time positions, Statistics
Canada data indicated. 
    The country also posted a record trade deficit of C$4.1
billion in September but the figure was boosted by the one-off
import of machinery for an oil project. 
    "The lackluster trend in exports suggest that we are still
going to need a cheap Canadian dollar for a long time plus a
cheaper still Canadian dollar going forward," said Nick Exarhos,
economist at CIBC Capital Markets.
    "What the employment figures do suggest though is that the
near-term pressure on the Bank of Canada to ease rates or sound
any more dovish than they have already sounded has diminished,"
Exarhos added.
    The implied probability of a Bank of Canada interest rate
cut by mid-2017 dipped to less than 30 percent from 34 percent
before the economic reports, overnight index swaps data showed.
 
    Oil futures were on course for their sixth straight day of
losses as signs of tensions resurfaced between Saudi Arabia and
Iran that could scupper a key supply cut pact. U.S. crude 
prices were down 1.19 percent at $44.13 a barrel. 
    At 9:19 a.m. EDT (1319 GMT), the Canadian dollar 
was trading at C$1.3430 to the greenback, or 74.46 U.S. cents,
weaker than Thursday's close of C$1.3383, or 74.72 U.S. cents.
    The currency's strongest level of the session was C$1.3386,
while it touched its weakest since March 4 at C$1.3451.
    The U.S. dollar edged higher against a basket of
major currencies as U.S. employers maintained a strong pace of
hiring in October and boosted wages for workers, which could
effectively seal the case for a December interest rate increase
from the Federal Reserve. 
    Canadian government bond prices were higher across the yield
curve, with the two-year price up 2 Canadian cents to
yield 0.538 percent and the benchmark 10-year rising
13 Canadian cents to yield 1.184 percent.
    The 2-year yield fell 1.5 basis points further below its
U.S. equivalent to a spread of -28 basis points as U.S.
Treasuries underperformed at the front of the yield curve.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)

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