CANADA FX DEBT-C$ weakens on oil slump, solid U.S. data; losses pared

Fri Apr 1, 2016 5:08pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

(Adds strategist comment, details; updates prices to close)
    * Canadian dollar settles at C$1.3014, or 76.84 U.S. cents
    * Bond prices lower across the maturity curve

    By Alastair Sharp
    TORONTO, April 1 (Reuters) - The Canadian dollar slipped
versus the greenback on Friday as oil prices slumped and after
stronger-than-expected U.S. jobs data, but the currency pared
losses as markets doubted the Federal Reserve will surrender its
cautious stance.
    The Canadian dollar settled at C$1.3014 to the
greenback, or 76.84 U.S. cents, weaker than Thursday's close of
C$1.2987, or 77.00 U.S. cents. 
    It had touched its weakest in three days at C$1.3147 earlier
in the session, after appreciating 6.5 percent in the first
quarter of 2016.
    U.S. employment jumped in March, but an influx of Americans
into the labor market could restrain nascent wage gains and keep
the Fed cautious on raising interest rates. 
    That data followed comments from Fed Chair Janet Yellen this
week that slowing world growth and lower oil prices posed a
downside risk to the U.S. economic outlook, which the Fed last
month downgraded as it forecast only two rate hikes this year.
    "It's only a matter of time before the conversation turns to
'OK nothing in 2016, what's the first date they're looking to go
in 2017'," said Brad Schruder, director of corporate sales and
structuring at Bank of Montreal. "And that will be a very
bearish conversation vis-a-vis the U.S. dollar." 
    Schruder said the loonie, as Canada's currency is
colloquially known, should also do well against the euro and
British pound in coming months as the Brexit vote and
accommodative monetary policy from the European Central Bank
weigh on those currencies.
    The loonie touched a 5-1/2-month high at C$1.2859 on
Thursday after monthly gross domestic product (GDP) data showed
a surprising jump in economic growth that further dented
expectations for a Bank of Canada rate cut. 
    Oil tumbled more than 4 percent after a Saudi prince
reportedly said the kingdom will not freeze output without Iran
and other major producers doing so. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 1.5
Canadian cents to yield 0.547 percent and the benchmark 10-year
 falling 14 Canadian cents to yield 1.24 percent.    
    The Canada-U.S. 10-year spread was 2.4 basis points narrower
at -53.5 basis points, its least negative since Oct. 20, as
Treasuries outperformed at the long end.
    Canada plans to stick with major investment plans included
in last week's budget, regardless of the level of the Canadian
dollar or a pickup in short-run growth, the country's finance
minister said. 

 (Additional reporting by Fergal Smith; Editing by W Simon and
Meredith Mazzilli)