January 27, 2017 / 10:37 PM / 7 months ago

CANADA FX DEBT-C$ weakens as oil falls, investors brace for Poloz

(Adds analyst quotes and details on CFTC data and updates
prices)
    * Canadian dollar ends at C$1.3138, or 76.12 U.S. cents
    * Loonie rises 1.3 percent for the week
    * Bond prices higher across a steeper yield curve

    By Fergal Smith
    TORONTO, Jan 27 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as oil fell and investors
braced for a speech next week by Bank of Canada Governor Stephen
Poloz, while the greenback extended its recovery against a
basket of major currencies.    
    The U.S. dollar rose for a second straight day on the
view that it would gain from a rise in border tariffs, tax
reform and future stimulus spending. 
    "I still think the market is looking for dollar-CAD to try
and resume its upside and maybe there is a little bit of
position squaring going on looking forward to next Tuesday's
Canadian GDP (gross domestic product) data and the Bank of
Canada Governor Poloz speaking as well," said Amo Sahota,
director at Klarity FX.
    "Poloz is the wildcard out here and the market expects him
to retain his dovish commentary and maybe get a bit more bang
for his buck on trying to talk the currency down."
    U.S. crude oil futures settled 61 cents lower at
$53.17 a barrel after data suggested drilling is ramping up in
the United States. 
    Oil is one of Canada's major exports.        
    Speculators turned bullish on the Canadian dollar for the
first time since September, data from the Commodity Futures
Trading Commission and Reuters calculations showed. Canadian
dollar positions swung to net long 2,519 contracts as of Jan. 24
from net short 5,456 contracts a week earlier.
    The Canadian dollar ended at C$1.3138 to the
greenback, or 76.12 U.S. cents, weaker than Thursday's close of
C$1.3098, or 76.35 U.S. cents.
    The currency's strongest level of the session was C$1.3085,
while its weakest was C$1.3155.
    For the week, the loonie rose 1.3 percent as investor fears
of a more unfavorable trade outlook for Canada abated and after
U.S. President Donald Trump signed orders on Tuesday smoothing
the path for the Keystone XL oil pipeline.
    If built, the pipeline from Alberta to Nebraska would yield
about $2.4 billion a year for Canada, split between government
revenues, shareholder profits and re-investment into the
still-recovering Canadian oil patch, according to a Conference
Board of Canada research note prepared for Reuters on Thursday.
 
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year up 2 Canadian cents to
yield 0.805 percent and the 10-year rising 36
Canadian cents to yield 1.777 percent.
    On Thursday, the 10-year yield had touched a nearly six-week
high at 1.851 percent.
    

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Tom Brown)

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