CANADA FX DEBT-C$ flat as oil holds steady, but weakness eyed

Tue Mar 24, 2015 4:30pm EDT
 
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* Canadian dollar at C$1.2501, or 79.99 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Alastair Sharp
    TORONTO, March 24 (Reuters) - The Canadian dollar was flat
versus its U.S. counterpart on Tuesday, as the price of crude
oil held steady despite concerns about oversupply, which
suggests that further loonie weakness is likely.
    "The Canadian dollar this week is reflecting some optimism
about oil prices," said Adam Button, currency analyst at
ForexLive in Montreal. "There's a lot of bad news hitting oil
and it's holding in there." 
    U.S. oil prices shrugged off the challenges of weak Chinese
data, a survey pointing to rising U.S. crude stocks, and Saudi
comments about production there nearing an all-time high. 
    The Canadian dollar ended the North American
session at C$1.2501 to the greenback, or 79.99 U.S. cents,
barely weaker than Monday's close of C$1.2499, or 80.01 U.S.
cents.
    Button said oil still faces many challenges and that the
currency of Canada, a major oil producer, would also suffer in
coming weeks and could hit C$1.30 before the end of April.
    A sharp fall in the value of the Canadian dollar was
interrupted last week after the U.S. Federal Reserve said it
might delay hiking interest rates.
    "The selloff in the U.S. dollar post-FOMC was quite telling
overall from a price action point of view. It does suggest we've
probably seen a bit of a peak in the U.S. dollar here," said
Shaun Osborne, chief currency strategist at TD Securities. 
    With little on the domestic data front until next week, a
speech by Bank of Canada Governor Stephen Poloz on Thursday will
be a key focus for market watchers.
    "Given the growth challenges we're likely to see for the
Canadian economy, it's quite likely rates will have to move a
little bit lower at least," Osborne said. "That is going to be
drag on Canadian dollar performance, but not for the moment," he
added, noting that the central bank will likely wait until
first-quarter data is released in May before moving on rates.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year down 2 Canadian
cents to yield 0.467 percent and the benchmark 10-year
 gained 8 cents, yielding 1.300 percent.

 (Additional reporting by Solarina Ho; Editing by Peter Galloway
and Leslie Adler)