February 15, 2017 / 9:44 PM / 3 years ago

CANADA FX DEBT-C$ pares losses on firm data, optimism on trade ties

 (Adds portfolio manager quotes, details on Yellen testimony;
updates prices)
    * Canadian dollar ends at C$1.3075, or 76.48 U.S. cents
    * Bond prices end lower across the yield curve
    * 10-year yield touches two-week high at 1.801 percent

    By Fergal Smith
    TORONTO, Feb 15 (Reuters) - The Canadian dollar pared most
of its losses against the greenback on Wednesday, supported by
firm domestic data and optimism about the outlook for trade ties
with the United States.
    Broader gains for the U.S. dollar        against a basket of
currencies had pressured the loonie earlier in the day after
stronger-than-expected U.S. inflation and retail sales data
added to hawkish comments from Federal Reserve Chair Janet
Yellen the day before. But the greenback turned lower as Yellen,
in her second day of economic testimony before Congress, offered
no additional insight on the timing of the U.S. central bank's
next rate hike.
    Canadian manufacturing sales jumped for the second month in
a row in December, with the 2.3 percent rise far exceeding
economists' expectations for a gain of 0.2 percent.             
    "The economy seems on a stronger footing," said Hosen
Marjaee, senior managing director, Canadian fixed income at
Manulife Asset Management.
    The loonie got a boost on Monday after U.S. President Donald
Trump said he only wants to tweak trade ties with Canada.
    "One big worry that we had (for the loonie) was with respect
to the potential trade negotiations with the U.S. ... it seems
we are a little bit off the hook," Marjaee said.
    Canada sends 75 percent of its exports to the United States,
but took a step on Wednesday toward reducing its reliance on its
southern neighbor.
    The European Union and Canada secured clearance on Wednesday
for their contentious free trade deal and the removal of import
duties that supporters say will boost growth and jobs on both
sides of the Atlantic.             
    U.S. crude        prices settled 9 cents lower at $53.11 a
barrel, mostly holding its ground after U.S. stockpiles soared
to a record high.      
    Oil is one of Canada's major exports.
    The Canadian dollar          ended at C$1.3075 to the
greenback, or 76.48 U.S. cents, slightly weaker than Tuesday's
close of C$1.3071, or 76.51 U.S. cents.
    The currency traded in a range of C$1.3066 to C$1.3120.
    In other domestic data, resales of Canadian homes fell 1.3
percent in January from December.             
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries on the firm economic
data. The two-year            fell 3 Canadian cents to yield
0.815 percent and the 10-year             declined 17 Canadian
cents to yield 1.785 percent.
    The 10-year yield touched its highest intraday since Feb. 1
at 1.801 percent.

 (Reporting by Fergal Smith; Editing by Jeffrey Benkoe and James
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