CANADA FX DEBT-C$ weakens to nearly 6-week low as oil falls

Wed Sep 14, 2016 9:26am EDT
 
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* Canadian dollar at C$1.3186, or 75.84 U.S. cents
    * Loonie touches its weakest since Aug. 5 at C$1.3200
    * Bond prices higher across the maturity curve

    TORONTO, Sept 14 (Reuters) - The Canadian dollar weakened to
a nearly six-week low against its U.S. counterpart on Wednesday
as oil prices fell and risk appetite remained constrained.
    A recent rise in bond yields, triggered in part by deepening
worries over the difficulty of the world's major central banks
to stimulate growth, kept investors in broadly risk-off mode.
 
    The rise in bond yields weighs on higher-yielding
commodity-linked currencies such as the Canadian dollar.
    Oil fell despite data from an industry group that showed a
smaller-than-expected build in U.S. crude stockpiles. U.S. crude
 prices were down 0.60 percent at $44.63 a barrel.
    At 8:51 a.m. EDT (1251 GMT), the Canadian dollar 
was trading at C$1.3186 to the greenback, or 75.84 U.S. cents,
slightly weaker than Tuesday's close of C$1.3170, or 75.93 U.S.
cents.
    The strongest level of the session for the currency was
C$1.3128, while it touched its weakest since Aug. 5 at C$1.3200.
    The reduced potential for global economic growth and
resultant lower neutral interest rates could pose risks for
financial stability, Bank of Canada Senior Deputy Governor
Carolyn Wilkins said. 
    Wilkins also reiterated the dovish message of last week's
statement from the central bank, saying there were downside
risks to Canadian inflation due to question marks about exports.
    Austrian Chancellor Christian Kern's opposition to a free
trade agreement between the European Union and Canada was
countered by fervent praise for the deal from his deputy at a
special parliamentary session on the matter. 
    On Monday, Canadian Trade Minister Chrystia Freeland said
her country was working toward signing a new trade agreement
with the European Union in October.        
    Canadian government bond prices were higher across the yield
curve, with the two-year up 2.5 Canadian cents to
yield 0.589 percent and the benchmark 10-year rising
32 Canadian cents to yield 1.196 percent.
    Earlier in the session, the 10-year yield touched its
highest since June 23 at 1.281 percent.
    Canadian home prices climbed 11.4 percent in August from a
year earlier, data showed. Leading the gains were the two
hottest markets, Vancouver and Toronto, where prices have more
than doubled in just over 11 years. 

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn)