CANADA FX DEBT-C$ hits 11-week high, cheers oil rebound
(Adds comment, details; updates prices) * Canadian dollar ends at C$1.3541, or 73.85 U.S. cents * Bond prices higher across the maturity curve By Alastair Sharp TORONTO, Feb 25 (Reuters) - The Canadian dollar hit its strongest level against its U.S. counterpart in more than two months on Thursday, as investors unwound bets on a rising U.S. dollar and cheered a rebound in oil prices. Oil fell early as record U.S. crude inventories added to worries about oversupply in a slowing global economy, but later reversed course after Venezuela reaffirmed an oil producers meeting in mid-March that would include Saudi Arabia, Russia and Qatar. Oil is a major Canadian export, and its low price has weighed on the country's economy and currency since late 2014. But as skepticism about the pace of any rate hikes from the U.S. Federal Reserve increases, long U.S. dollar positions and related short positions in the loonie are being unwound. "The global currency world is locked in a trunk of a long U.S. dollar position, and they're screaming, 'Let me out'," said Brad Schruder, director of foreign exchange sales at BMO Capital Markets. The Canadian dollar ended the session at C$1.3541 to the greenback, or 73.85 U.S. cents, much stronger than Wednesday's official close of C$1.3687, or 73.06 U.S. cents. It smashed through C$1.3640, after several attempts were made on this level earlier this month, touching its strongest level since Dec. 9 at C$1.3517. U.S. Fed official John Williams said the central bank should gradually raise rates, with the pace and number of hikes to be based on inflation and other data. Currencies could factor prominently at a meeting of G20 countries this weekend, after host China devalued its yuan last year, while pressure is on leaders to get the global economy back on track and calm markets after one of the rockiest starts to a year on record. The Canadian currency extended its recovery from a 12-year low of C$1.4689 in January, helped by stabilization in crude oil prices and the shifting of the fiscal stimulus burden from the Bank of Canada to the Canadian government. The federal government will run much bigger deficits than anticipated and push ahead with plans to invest in infrastructure projects, while adding private-sector spending to projects could spur even greater spending and limit the need for a Bank of Canada rate cut. Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.489 percent and the benchmark 10-year rising 12 Canadian cents to yield 1.137 percent. (Additional reporting by Fergal Smith and Alastair Sharp; Editing by Paul Simao, Diane Craft)
© Thomson Reuters 2017 All rights reserved.