CANADA FX DEBT-C$ hits nearly 5-month high as greenback tumbles, oil rallies

Thu Mar 17, 2016 4:41pm EDT
 
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(Adds strategist comment, updates prices)
    * Canadian dollar settles at C$1.2989, or 76.99 U.S. cents
    * The currency touched its strongest since Oct. 20 at
C$1.2946
    * Bond prices slightly higher across the maturity curve

    By Alastair Sharp
    TORONTO, March 17 (Reuters) - The Canadian dollar
strengthened to a nearly five-month high against its U.S.
counterpart on Thursday as the greenback sunk on lower Federal
Reserve rate hikes expectations and the oil market rally
extended further.
    The U.S. dollar extended its tumble against a basket
of major currencies triggered by the Fed's Wednesday statement
that it now expects just two quarter-point rate hikes this year,
not four. 
    "We might be at the introductory stage of a new range when
it comes to valuations of the greenback against majors"
including the Canadian dollar, euro, and Japanese yen, said Brad
Schruder, director of corporate sales and structuring at Bank of
Montreal.
    The Fed move "has emboldened those that need to buy U.S.
dollar, the importer, that their steely resolve when we were
pushing C$1.48 is being rewarded," he said.
    In the two years since the Canadian currency traded at
parity with its U.S. counterpart it had consistently weakened,
but has reversed course since hitting C$1.4689 in January. 
    "To have it change so swiftly has caught a lot of the
exporters flat-footed," Schruder said.
    The Canadian dollar settled at C$1.2989 to the
greenback, or 76.99 U.S. cents, much stronger than Wednesday's
close of C$1.3122, or 76.21 U.S. cents.
    The currency touched its strongest since Oct. 20 at
C$1.2946.       
    Schruder said a new trading range could extend to C$1.2625
with a topside around C$1.35-1.37 in next few months.
    U.S. oil prices surged 5 percent to burst above $40 a
barrel, bolstered by a plan among some of the world's biggest
producers to meet next month to discuss supporting the market.
 
    The value of Canadian wholesale trade remained unchanged in
January from December, data from Statistics Canada showed. The
reading was slightly below expectations for a 0.2 percent
increase after a revised 1.8 percent gain in December.
 
    However, it followed strong Canadian manufacturing data on
Wednesday that caught the market's attention. 
    Canadian government bond prices were slightly higher across
the maturity curve in sympathy with U.S. Treasuries.
    The two-year price rose half a Canadian cent to
yield 0.532 percent and the benchmark 10-year was up
10 Canadian cents to yield 1.290 percent.
    The province of Quebec said it balanced its books in
2015-16, the first time in seven years, and would repeat the
feat in 2016-17. 

 (Additional reporting by Fergal Smith; Editing by Andrea Ricci
and Sandra Maler)