CANADA FX DEBT-C$ slides vs US$, but outperforms others despite drop in crude

Thu Nov 6, 2014 4:54pm EST
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(Updates with additional details, fresh comment, closing
    * Canadian dollar at C$1.1426, or 87.52 U.S. cents
    * Bond prices were mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, Nov 6 (Reuters) - The Canadian dollar weakened on
Thursday against the greenback, which strengthened on positive
U.S. jobless claims data and dovish comments by the European
Central Bank president, but outperformed most of its other
currency counterparts.
    In Canada, data showed the value of building permits beat
expectations, jumping 12.7 percent in September and recovering
some of the previous month's drop, but the impact of the
positive data on the currency was tempered by external
    "When the U.S. dollar is on fire, it's going to gain against
everything," said Greg Anderson, global head of foreign exchange
strategy at BMO Capital Markets in New York.
    "But actually, CAD is performing better than its peers and
better than you might expect given what's going in other related
    Oil markets retreated on worries about high supplies and a
strong greenback, which also weighed on the U.S.-priced crude.
    The Canadian dollar, which touched a five-year low
in the previous session before rebounding, closed at C$1.1426 to
the greenback, or 87.52 U.S. cents, weaker than Wednesday's
close of C$1.1389, or 87.80 U.S. cents.
    It was the second-strongest performer among the G10
currencies, however, despite oil prices and substantially higher
U.S. bond yields, Anderson noted.
    Earlier in the session, ECB President Mario Draghi, playing
down the extent of discord on the governing council, insisted he
had unanimous agreement behind his monthly statement on the
potential future size of the ECB's balance sheet and the
possibility of more measures to fight deflation.
    Euro zone inflation remains far below the central bank's
target of just under 2 percent, underscoring the difficulty of
meeting the ECB's target in a stagnating economy.
    "(Draghi's comments) put a lot of downward pressure on the
euro, which by extension has boosted the American dollar," said
Scott Smith, senior market analyst at Cambridge Mercantile Group
in Calgary.
    In the United States, the number of Americans filing new
claims for unemployment benefits fell more than expected last
week. The data comes on the heels of another report on Wednesday
that showed U.S. private employers created the most new jobs
since June, exceeding forecasts. 
    Smith said market participants were also positioning
themselves on expectations that the U.S. non-farm payroll
figures due on Friday will be robust. Canada's monthly jobs data
is also due on Friday.
    BMO's Anderson said the Canadian dollar could break C$1.15
if the U.S. employment report is strong and Canada's is weak. 
    "Absent of that, I don't expect the jobs report as big of
movers as they have been earlier this year," he said, noting the
volatility in the Canadian data and the Fed's broader focus on
factors that could influence its monetary policy.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year down 5 Canadian
cents to yield 1.031 percent and the benchmark 10-year
 off 31 Canadian cents to yield 2.086 percent.

 (Editing by Bernadette Baum and Cynthia Osterman)