CANADA FX DEBT-C$ posts modest gain as crude rises, US$ eases

Mon Apr 6, 2015 4:56pm EDT
 
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* Canadian dollar at C$1.2478 or 80.14 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, April 6 (Reuters) - The Canadian dollar made modest
gains against its U.S. counterpart on Monday as the greenback
fell against a group of currencies and oil prices jumped, but a
late-session U.S. dollar surge knocked the loonie off its highs
for the day.
    The U.S. dollar was hurt by disappointing nonfarm payrolls
data on Friday that showed U.S. jobs growth was much weaker than
expected in March, suggesting the Federal Reserve will hold off
hiking interest rates until the second half of the
year. 
    "There was a knee-jerk reaction to take profits on those
U.S. dollar longs," said Bipan Rai, director of foreign exchange
strategy at CIBC World Markets.
     Rai said stops in the euro contributed to a late-session
move in the U.S. dollar's favor. 
    "Really, in our view, one bad apple doesn't really spoil the
basket. You still had very strong job creation out of the U.S.
in 2014. If we get a stronger print for April nonfarms, chances
are markets will forget completely about what happened in
March."
    The Canadian dollar ended the session at C$1.2478
to the U.S. dollar, or 80.14 U.S. cents. That was stronger than
Friday's finish of C$1.2496, or 80.03 U.S. cents, based on
Thomson Reuters Eikon data, and sharply up from the Bank of
Canada's official close on Thursday of C$1.2564, or 79.59 U.S.
cents.
    Trading has been thin since Good Friday, with many markets
in the Americas and Europe closed for the Easter holidays.
    The loonie, which outperformed all its major counterparts on
Monday, appears to be consolidating between C$1.24 and C$1.28,
Rai said.
    The U.S. dollar's late rally limited the loonie's reaction
to the higher price of crude, a key Canadian export. Oil prices
surged more than 5 percent on speculation Iran might not
increase oil exports much following its preliminary nuclear deal
with world powers, and on expectations that a months-long rise
in U.S. crude inventories may be slowing. 
    Lower oil prices have dampened the overall sales outlook for
Canadian companies, weighing on investment and hiring
intentions, according to Bank of Canada's business outlook
survey released on Monday. 
    Canadian government bond prices were mixed across the
maturity curve, with longer-term securities lower. The two-year
 price fell 1.5 Canadian cents to yield 0.501 percent
and the benchmark 10-year slipped 36 Canadian cents
to yield 1.351 percent.
    The Canada-U.S.two-year bond spread was 0.1. The 10-year
spread was 54.8.

 (Reporting by Solarina Ho; Editing by Peter Galloway)