March 28, 2017 / 9:30 PM / 4 months ago

CANADA FX DEBT-C$ hangs in with strong U.S. dollar as oil prices rise

3 Min Read

 (Adds Bank of Canada, broker comment, updates prices to close)
    * Canadian dollar settles at C$1.3383, or 74.72 U.S. cents
    * Bond prices lower across yield curve

    By Alastair Sharp
    TORONTO, March 28 (Reuters) - The Canadian dollar hung in
with a broadly stronger U.S. dollar on Tuesday, helped by rising
prices for oil, a major Canadian export, as the Bank of Canada
stuck to its cautious tone.
    Canada's economy has a lot more room to grow, with higher
unemployment and more excess capacity than the United States,
and if interest rates were raised today Canada would tip into
recession, Bank of Canada Governor Stephen Poloz said. 
    Poloz defended the bank's dovish outlook - which contrasts
with the U.S. Federal Reserve's hike earlier this month and plan
for more - in the face of recent stronger-than-expected growth
in jobs, gross domestic product and retail sales.             
    Canada is due to report GDP data for January on Friday.
    The Canadian dollar          settled at C$1.3383 to the
greenback, or 74.72 U.S. cents, slightly weaker than Monday's
close of C$1.3376, or 74.76 U.S. cents.
    "You might call that a victory, when the U.S. dollar is
gaining relative to some of the other majors, the fact that we
held in sub-C$1.34 is probably considered a good thing," said
Don Mikolich, executive director for foreign exchange sales at
CIBC Capital Markets. 
    The currency's strongest level of the session was C$1.3355,
while it touched its weakest since March 15 at C$1.3415.
    The U.S. dollar        rose off 4-month lows against a
basket of major currencies as a top Federal Reserve official
reinforced expectations of more U.S. rate hikes to come while
political uncertainties surrounding Britain's exit from the EU
pressured European currencies.
    Oil prices rose as much as 2 percent after a severe
disruption to Libyan oil supplies and as officials suggested
OPEC and other producing countries could extend an output cuts
deal to the end of the year.      
    Canadian government bond prices fell across the yield curve,
with the two-year            down 2 Canadian cents to yield
0.741 percent, after earlier falling to its lowest yield since
Feb. 8, while the 10-year             price fell 18 Canadian
cents to yield 1.627 percent.
    The spread between Canadian and U.S. 10-year yields matched
its widest since March 2.

 (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn
and Grant McCool)
  
 

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