CANADA FX DEBT-C$ weakens as greenback jumps ahead of jobs data

Thu Oct 6, 2016 5:10pm EDT
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(Adds strategist comment, updates prices to close)
    * Canadian dollar settles at C$1.3213, or 75.68 U.S. cents
    * Bond prices lower across steeper yield curve

    By Alastair Sharp
    TORONTO, Oct 6 (Reuters) - The Canadian dollar weakened
against a broadly stronger U.S. counterpart on Thursday, with
higher oil prices offering little support as investors brace for
further evidence of monetary policy divergence between the two
    A potentially strong U.S. jobs report on Friday could
further weaken the loonie, as Canada's currency is colloquially
known, as investors increase bets that the Federal Reserve will
raise U.S. interest rates later this year.
    U.S. data on Thursday showed the number of Americans filing
for unemployment benefits unexpectedly fell last week to near a
43-year low. 
    Canada also reports September employment data on Friday, but
the country's central bank is widely seen keeping rates on hold
for a prolonged period, with some chance of a near-term cut.
    "A beat in tomorrow's (U.S.) numbers will go a long way to
making the December meeting a quote-unquote 'live' meeting,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
    Meanwhile, risks to Canadian inflation remain tilted to the
downside as the economy takes time to adjust to the oil price
shock and awaits a boost from fiscal stimulus and the U.S.
economic recovery, a senior Bank of Canada official said.
    The Canadian dollar settled at C$1.3213 to the
greenback, or 75.68 U.S. cents, weaker than Wednesday's close of
C$1.3182, or 75.86 U.S. cents.
    That settlement was one pip stronger than the 200-day moving
average of C$1.3214, according to Reuters data.
    Oil rose more than 1 percent, spurred by news of another
informal OPEC meeting on output cuts and plunging U.S. crude
inventories, with some saying the market has overshot itself
with a near 15-percent gain in seven sessions. 
    The Canadian currency's strongest level of the session was
C$1.3177, while its weakest was C$1.3249. That was its weakest
since Sept. 28.
    Strategists expect the Canadian dollar to strengthen over
the coming year as higher oil prices provide support, but
monetary policy divergence and U.S. election risk should
restrain the currency in the near term, a Reuters poll found.
    Canadian government bond prices were lower across the
maturity curve. The two-year fell 1 Canadian cent to
yield 0.584 percent, and the benchmark 10-year 
declined 44 Canadian cents to yield 1.139 percent.

 (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn
and James Dalgleish)