January 20, 2017 / 10:14 PM / 6 months ago

CANADA FX DEBT-C$ steady following earlier losses on domestic data

3 Min Read

* Canadian dollar at C$1.3315 or 75.10 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, Jan 20 (Reuters) - The Canadian dollar pared
earlier losses following weaker-than-expected inflation and
retail sales data, to finish little changed against its U.S.
counterpart on Friday.
    Canada's annual inflation rate rose to 1.5 percent in
December from November's 1.2 percent, short of analysts'
forecasts for an increase to 1.7 percent, while retail sales
edged up 0.2 percent in November, just shy of expectations for
an increase of 0.5 percent.  
    Markets were focused on the inauguration and speech by
incoming U.S. president Donald Trump to see if he would give any
indication on the new administration's policies.
    "The market in general ... were anxiously awaiting any type
of surprise comment during the inauguration speech. And when
that didn't happen, for all intents the market feels as though
it was ready to call it a week," said Brad Schruder, director,
foreign exchange sales at BMO Capital Markets.  
    The Canadian dollar ended at C$1.3327 to the
greenback, or 75.04 U.S. cents, little changed from the Bank of
Canada's official close of C$1.3314, or 75.11 U.S. cents.
    The currency's strongest level of the session was C$1.3285,
while its weakest level was C$1.3388. It has weakened roughly 2
Canadian cents, or 1.5 percent on the week.
    Earlier in the week, the loonie, which had been trading near
the C$1.30 level against the U.S. dollar, took a tumble after
Bank of Canada Governor Stephen Poloz indicated that an interest
rate cut was still possible.
    Schruder noted that the Canadian dollar's swing this week
from around C$1.30 to just below C$1.34 mirrored moves in mid
October following comments from the Bank of Canada.
    "That suggests to me that as USD/CAD approaches C$1.30, the
Bank of Canada would much prefer to see the Canadian dollar
weaken from that point, rather than pick up any steam below that
level," said Schruder.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year price up 3.5
Canadian cents to yield 0.772 percent and the benchmark 10-year
 rising 9 Canadian cents to yield 1.75 percent.
    The Canada-U.S. two-year bond spread was -42.1 basis points,
while the 10-year spread was -71.9 basis points.

 (Reporting by Solarina Ho; editing by Grant McCool)

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