November 15, 2016 / 10:07 PM / 8 months ago

CANADA FX DEBT-C$ rises for first time since U.S. election as oil rallies

3 Min Read

(Adds trader comment, updates prices to close)
    * Canadian dollar settles at $1.3447, or 74.37 U.S. cents
    * Bond prices rise across the maturity curve

    By Alastair Sharp
    TORONTO, Nov 15 (Reuters) - The Canadian dollar on Tuesday
gained against its U.S. counterpart for the first time since
last week's U.S. election as oil rallied and a spike in bond
yields paused.
    The Canadian currency had given up 50 percent of its
January-May gains, a technical retracement that prompted traders
and analysts to reassess the currency's outlook.
    "People felt that's a level they should probably unload some
of their hedge, or if you caught the move in a positive way from
a long (dollar-Canada) bias then maybe you sold some," said
Darcy Browne, managing director for foreign exchange sales at
CIBC Capital Markets.
    The loonie's strength was exacerbated by oil surging nearly
6 percent off multi-month lows on expectations OPEC will agree
this month to cut production to reduce a supply glut. 
    "We've had a lot of little down moves to make this move down
to $42, but 6 percent back is a really hard, abrupt,
in-your-face move which people will trade off of," Browne said. 
    U.S. crude settled $2.49 higher at $45.81 per barrel,
a 5.8 percent gain, its biggest daily percentage increase since
early April. Brent futures settled at $46.95 a barrel,
up $2.52, or 5.7 percent, its sharpest gain since Sept. 28.
    Canada is a major oil exporter.
    The Canadian dollar settled at C$1.3447 to the
greenback, or 74.37 U.S. cents, stronger than Monday's close of
C$1.3551, or 73.80 U.S. cents. At one point on Monday the loonie
touched C$1.3589, its weakest in eight months.
    The U.S. dollar held onto recent gains against a
basket of major currencies as U.S. retail sales rose more than
expected in October, pointing to sustained economic strength
that could allow the Federal Reserve to raise interest rates
next month. 
    Canadian home resales and prices rose in October as the
nation's long housing boom continued, two separate reports
showed on Tuesday, but analysts said higher borrowing costs have
increased the risk of a correction.   
    Canadian government bond prices were higher across the yield
curve, with the two-year up 1 Canadian cent to yield
0.665 percent and the benchmark 10-year rising 8
Canadian cents to yield 1.542 percent.
    The 20-year and 30-year prices rose more sharply as the
longer-dated bonds recovered some lost ground.
    On Monday, the 10-year yield touched its highest in 11
months at 1.591 percent as investors bet that U.S.
President-elect Donald Trump will pursue policies that raise
inflation.

 (Additional reporting by Fergal Smith; Editing by Nick
Zieminski and James Dalgleish)

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