November 9, 2016 / 9:42 PM / 4 years ago

CANADA FX DEBT-C$ recovers from 8-month low, still weaker on Trump win

(Adds strategist comment, updates prices to close)
    * Canadian dollar ends at C$1.3378, or 74.75 U.S. cents
    * Loonie touches its weakest since March 1 at C$1.3525
    * Bond prices lower across a steeper maturity curve
    * 10-year yield touches its highest since May at 1.388

    By Fergal Smith and Alastair Sharp
    TORONTO, Nov 9 (Reuters) - The Canadian dollar pared losses
after hitting an eight-month low against its U.S. counterpart on
Wednesday as Republican Donald Trump's election to the White
House raised fears about the outlook for Canada's
trade-intensive economy.
    Canada relies heavily on selling goods and services into the
much larger U.S. market, and strategists said that if Trump
lives up to protectionist campaign talk it could force the Bank
of Canada to take more stimulative measures in order to stave
off a domestic recession. 
    "It's hard to see how, beyond Keystone perhaps, how a Trump
presidency is positive as far as Canada is concerned," said
Jimmy Jean, an economic strategist at Desjardins.
    "There's no question we are already in a fragile state and
the key engine of growth on which we had been counting to drive
us forward, now there is a big question mark around that," he
said, referring to the Canadian central bank's long-stated
expectation that a recovery in exports will boost overall
     The Canadian dollar ended at C$1.3378 to the
greenback, or 74.75 U.S. cents, weaker than Tuesday's close of
C$1.3305, or 75.16 U.S. cents.
    The currency's strongest level of the session was C$1.3265,
while it touched its weakest since March 1 at C$1.3525.
    The oil-linked currency recovered alongside crude prices
after a sharp morning slide. U.S. crude oil futures 
settled up 29 cents at $45.27 a barrel. 
    The loonie had gained against the U.S. dollar on Tuesday,
supported by expectations that Democratic presidential candidate
Hillary Clinton was likely to prevail.
    Trump has said he would renegotiate or scrap the North
American Free Trade Agreement if elected.
    "The uncertainty and the threat to tear up NAFTA are on net
a mild negative for the currency (Canadian dollar) but there are
certainly some small potential positives out there, especially
if the U.S now embarks a stimulative fiscal policy," said Doug
Porter, chief economist at BMO Capital Markets.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries as investors bet
that Trump would enact policies that will increase inflation.
    The two-year fell 2 Canadian cents to yield 0.592
percent and the benchmark 10-year tumbled 93
Canadian cents to yield 1.374 percent.
    The 10-year yield touched its highest since late May at
1.388 percent.

 (Additional reporting by Leah Schnurr; Editing by Grant McCool
and Meredith Mazzilli)
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