CANADA FX DEBT-C$ strengthens to an 11-day high as oil rallies

Mon Apr 11, 2016 5:54pm EDT
 
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(Adds analyst quotes and details on resistance levels, updates
prices)
    * Canadian dollar at C$1.2899, or 77.53 U.S. cents
    * Loonie touched its strongest since March 31 at C$1.2885
    * Bond prices mixed across the maturity curve

    By Fergal Smith
    TORONTO, April 11 (Reuters) - The Canadian dollar
strengthened to an 11-day high against its U.S. counterpart on
Monday as higher oil prices improved the outlook for Canada's
economy ahead of the Bank of Canada interest rate announcement
mid-week.
    A run of better-than-expected economic data at the start of
the year has also been supportive of the loonie, including
employment data on Friday showing the creation of 40,600 jobs in
March. 
    "You've got a huge economic growth swing from favoring the
U.S. just in mid-February to now favoring Canada," said Michael
Goshko, corporate risk manager at Western Union Business
Solutions.  
    Oil prices rose despite doubts that a meeting of producers
in Doha next Sunday will improve the demand-supply balance.
 
    U.S. crude prices settled at $40.36, up 1.6 percent.
    Bank of Canada Governor Stephen Poloz is expected to talk up
economic risks and play down signs of stronger growth when the
central bank sets interest rates on Wednesday, anxious to keep a
recovering currency from choking off exports. 
    The implied probability of a Bank of Canada interest rate
cut this year has dropped to 14 percent from more than 50
percent at the start of March. 
    The Canadian dollar closed at C$1.2899 to the
greenback, or 77.53 U.S. cents, stronger than Friday's official
close of C$1.3002, or 76.91 U.S. cents.
    The currency's weakest level of the session was C$1.3015,
while it touched its strongest level since March 31 at C$1.2885.
    It approached key resistance levels at C$1.2832, its
strongest level since the Bank of Canada last cut interest rates
in July, at C$1.2800.
    Penetration of C$1.2800 would force longer-term players to
act, triggering additional buying of Canadian dollars, according
to Goshko.
    Speculators have turned bullish on the Canadian dollar for
the first time since May last year, Commodity Futures Trading
Commission data showed on Friday. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up 2 Canadian
cents to yield 0.557 percent and the benchmark 10-year
 falling 10 Canadian cents to yield 1.239 percent.
    The Canada-U.S. 10-year spread moved 1.1 basis points higher
to -48.3 basis points, its least negative level since May last
year as Canadian government bonds underperformed.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and
Leslie Adler)