CANADA FX DEBT-C$ strengthens slightly as oil rallies, OPEC meets

Mon Sep 26, 2016 9:26am EDT
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* Canadian dollar at C$1.3152, or 76.03 U.S. cents
    * Bond prices higher across flatter yield curve

    TORONTO, Sept 26 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Monday as oil
prices rebounded, but gains were restrained as investors turned
cautious ahead of the first U.S. presidential debate.    
    Modest gains for the loonie followed losses on Friday as oil
tumbled and domestic inflation and retail sales data
    Canada's annual inflation rate in August dipped to a
10-month low, and retail sales unexpectedly fell in July,
reviving talk that the Bank of Canada was more inclined to ease
monetary policy than tighten. 
    The implied probability of a Bank of Canada rate cut by
mid-2017 has increased to more than 40 percent from less than 20
percent before the inflation report, overnight index swaps data
    U.S. crude prices were up 2.02 percent at $45.38 a
barrel as the world's largest producers gathered in Algeria to
discuss ways to support the market. 
    European and Asian shares retreated, with investors focused
on how U.S. Republican presidential candidate Donald Trump would
fare in the debate against Democrat Hillary Clinton.
    Canadian diplomats are fanning out across the United States
to talk up the benefits of trade with state and local leaders
and counter what senior officials see as a worrying mood of
protectionism swirling through the U.S. election campaign.
    At 9:06 a.m. EDT (1306 GMT), the Canadian dollar 
was trading at C$1.3152 to the greenback, or 76.03 U.S. cents,
slightly stronger than Friday's close of C$1.3171, or 75.92 U.S.
    The currency's strongest level of the session was C$1.3148,
while it touched its weakest since Wednesday at C$1.3200.
    Speculators pared bullish bets on the Canadian dollar for
the third straight week, Commodity Futures Trading Commission
data showed on Friday. Net long Canadian dollar positions dipped
to 16,303 contracts in the week ended Sept. 20 from 17,058
contracts in the prior week. 
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year up 9 Canadian cents to
yield 0.522 percent and the benchmark 10-year rising
62 Canadian cents to yield 1.035 percent.
    The 10-year yield has tumbled from a 1.281 percent peak in
mid-September. Earlier in the session, it hit its lowest since
Sept. 8 at 0.990 percent.

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