Canadian dollar edges higher as key data looms
By Frank Pingue
TORONTO, Feb 4 (Reuters) - The Canadian dollar finished a touch higher against the U S. dollar in a lackluster session on Monday as a rise in oil prices was not enough to spark a move ahead of key domestic data due later in the week.
Domestic bond prices ended lower as dealers pocketed gains following a rally on Friday when economic data from the United States suggested more rate cuts there.
The Canadian dollar closed at US$1.0067, valuing a U.S. dollar at 99.33 Canadian cents, up slightly from US$1.0060 to the U.S. dollar, or 99.40 Canadian cents, at Friday's close.
In a session that lacked any real direction, the Canadian dollar was knocked around in a range of US$1.0077 to C$1.0007 to the U.S. dollar.
"It's been a pretty quiet day," said George Davis, chief technical strategist at RBC Capital Markets. "There wasn't much economic data in the market and the other currencies were not really moving around all that much either."
With a lack of data to support a move in either direction, the domestic currency drew support from a favorable Canada-U.S. interest rate gap established Jan. 22 when the U.S. Federal Reserve delivered a surprise rate cut.
That rate reduction lifted the Canadian dollar from a four-month low and eventually helped lift it back above parity, a level many experts expect it to straddle for much of the year.
Also offering support for the Canadian dollar was a rebound in oil prices back over $90 a barrel. Canada is a key producer and exporter of oil and its currency often follows prices for the commodity.
While the Canadian market will digest some economic data releases midweek, the headline reports will be the January jobs and housing starts figures on Friday.
The domestic currency had little reaction to comments from senior Canadian finance officials ahead of a high-level meeting in Tokyo on Saturday, which the officials said will include talk about the impact on the global economy of interest rates.
At the talks, the Group of Seven finance ministers and central bank chiefs will also continue to stress the need for China to adopt a more flexible currency.
"I don't think there was anything overly new in terms of information for the market," said Davis. "And that probably explains, in part, why things have been so quiet and there hasn't been much of a reaction."
Bond prices ended lower across the curve as the lack of any fresh economic data convinced dealers to book profits following Friday's rally when U.S. non-farm payrolls data came in well below expectations.
The bond market will likely be influenced by the moves in equities, which were relatively stable on Monday, ahead of the economic data due later this week.
"It's a bit of a retraction from what occurred on Friday," said Max Clarke, economist at IDEAglobal in New York. "And we might just see this continue in the coming days."
The two-year bond dipped 4 Canadian cents to C$101.91 to yield 3.158 percent. The 10-year bond fell 21 Canadian cents to C$101.19 to yield 3.846 percent.
The yield spread between the two- and 10-year bond was 68.8 basis points, up from 68.3 points at the previous close.
The 30-year bond slid 45 Canadian cents to C$114.14 to yield 4.160 percent. In the United States, the 30-year treasury yielded 4.377 percent.
The three-month when-issued T-bill yielded 3.34 percent, down from 3.36 percent the previous close.
© Thomson Reuters 2017 All rights reserved.