January 12, 2017 / 9:46 PM / 6 months ago

CANADA FX DEBT-C$ hits near 3-month high as oil rises, US$ slides

3 Min Read

(Adds strategist comment, updates prices to close)
    * Canadian dollar ends at C$1.3132, or 76.15 U.S. cents
    * Loonie hits its strongest since Oct. 19 at C$1.3028
    * Bond prices higher across a flatter yield curve

    By Alastair Sharp
    TORONTO, Jan 12 (Reuters) - The Canadian dollar touched a
near 3-month high against its U.S. counterpart on Thursday as
oil prices rose and the greenback extended losses that began
after U.S. President-elect Donald Trump's news conference a day
earlier.
    The U.S. dollar tumbled against a basket of major
currencies, pressured by a loss of confidence in the U.S.
reflation trade which has dominated markets since Trump's
election. 
    The Canadian dollar settled at C$1.3132 to the
greenback, or 76.15 U.S. cents, stronger than Wednesday's close
of C$1.3177, or 75.89 U.S. cents.
    The price of oil, one of Canada's major exports, rose on
reports key OPEC members were cutting production as promised and
on forecasts of strong demand growth in China. 
    U.S. crude prices settled up 1.45 percent at $53.01 a
barrel.
    "Oil prices are a little bit higher and spreads have come
down a little bit, but that does not explain the entirety of the
Canadian dollar strength that we've seen so far this year," said
Shaun Osborne, chief currency strategist at Scotiabank, calling
it "completely antithetical to what we would have expected."
    The loonie nearly breached $1.36 late last year, and Osborne
said he saw fair value for the currency at around C$1.34.
    The currency's weakest level of the session was C$1.3195,
while it touched its strongest since Oct. 19 at C$1.3028.
    Gains for the loonie follow upbeat domestic data since the
start of the year, including a surge in jobs in December and the
first trade surplus in more than two years in November while a
Bank of Canada survey pointed to improving business conditions.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
 rose 1.2 Canadian cents to yield 0.774 percent and
the 10-year added 14 Canadian cents to yield 1.662
percent.
    Canadian new housing prices rose 0.2 percent in November
from October amid price increases across much of Ontario,
Statistics Canada said. 
    Separately, the Teranet-National Bank Composite House Price
Index showed home prices rose 0.3 percent in December from a
month earlier as prices continued to soar in Toronto, the
biggest market, and Victoria, while Vancouver prices fell again.
 

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and Tom Brown)

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