CANADA FX DEBT-C$ firms on higher oil, Bank of Canada speech

Thu Mar 26, 2015 4:17pm EDT
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* Canadian dollar at C$1.2471, or 80.19 U.S. cents
    * Poloz speech less dovish than some had expected
    * Bond prices lower across the maturity curve

 (Adds market reaction to air strikes, comment; updates to
    By Andrea Hopkins
    TORONTO, March 26 (Reuters) - The Canadian dollar
strengthened against the greenback on Thursday after oil prices
jumped on news that Saudi Arabia and its allies carried out air
strikes in Yemen and after Bank of Canada Governor Stephen Poloz
gave a speech that was less dovish than expected.
     Stock markets worldwide were knocked lower after the air
strikes in Yemen fueled worries that Middle East energy
shipments may be put at risk, although Wall Street later
     As the oil rally faded a bit, Poloz said the bank's
quarter-point rate cut in January has bought it time to examine
the effects of cheaper oil on the economy of Canada, a major oil
producer. The remarks underscored the possibility the central
bank will keep interest rates steady next month. 
    Poloz allowed the possibility that first-quarter economic
growth might come in lower than the bank's 1.5 percent forecast,
and he did not rule out a negative reading, though he said
growth was expected to bounce back later this year.
    "Oil is the major driver today for the Canadian dollar, and
along with the rally in oil prices, you have Poloz saying the
Bank of Canada probably won't cut rates even if the economy
weakens, and altogether that puts the Canadian dollar up about
half a cent on the day," said Adam Button, currency analyst at
ForexLive in Montreal. 
    The Canadian dollar ended the North American
session at C$1.2471 to the greenback, or 80.19 U.S. cents, up
from Wednesday's session close of C$1.2517, or 79.89 U.S. cents.
It had strengthened as far as C$1.2410 on the airstrikes
overnight, but gave up some gains later in the session.
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 15 Canadian
cents to yield 0.585 percent and the benchmark 10-year
 down 88 Canadian cents to yield 1.434 percent.

 (Reporting by Andrea Hopkins; Editing by Peter Galloway and
Leslie Adler)