June 27, 2017 / 9:20 PM / in 6 months

CANADA FX DEBT-C$ hits four-month high on firmer oil, softer greenback

    * Canadian dollar at C$1.3166, or 75.95 U.S. cents
    * Bond prices lower across the yield curve
    * Loonie touches its strongest since February 27 at C$1.3148

    By Solarina Ho
    TORONTO, June 27 (Reuters) - The Canadian dollar touched its
strongest level in four months against the greenback on Tuesday,
supported by a crude oil rally and a broadly weaker U.S. dollar,
which lost ground against a basket of major currencies.
    Prices of oil, one of Canada's major exports, hit a one-week
high on the back of a weaker greenback, short covering and
expectations that crude inventories may decline.             
    The U.S. dollar        hit 10-month lows against the euro,
which firmed after the European Central Bank opened the door to
tweaks that might begin to reduce the central bank's emergency
stimulus to the economy shortly.             
    The International Monetary Fund also cut its growth
forecasts for the U.S. economy citing uncertainty over President
Donald Trump's fiscal plan.             
    "A number of things are coming together here," said Shaun
Osborne, chief currency strategist at Scotiabank, noting that
the U.S. economic growth advantage has shrunk considerably in
recent months as the global economy performed better.
    "That's particularly the case with Canada, where the
Canadian economy seems to be on a bit of a roll at the moment."
    At 4:00 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.3166 to the greenback, or 75.95 U.S. cents, up
0.6 percent.
    The currency touched C$1.3148, its strongest level since
Feb. 27. Its weakest level of the session was C$1.3260.
    "The 800lb gorilla in the room is the very large CAD short
we still had on Friday," Osborne added. "You've got to think
some of the CAD strength is related to position adjustment as
those shorts gets squeezed out."
    Speculators cut bearish bets on the loonie for a fourth
straight week, data from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed on Friday. Canadian
dollar net short positions fell to 82,881 contracts as of June
20 from 88,595 a week earlier.
    The currency's gains came ahead of remarks on Wednesday by
Bank of Canada Governor Stephen Poloz, who will be participating
in a panel discussion at the European Central Bank's Forum on
Central Banking.
    Canadian government bond prices were lower across the yield
curve, with the two-year            price down 13 Canadian cents
to yield 0.975 percent and the 10-year             declining 95
Canadian cents to yield 1.570 percent.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 4.3 basis points to a spread of -40.6
basis points as Canadian bonds underperformed.

 (Additional reporting by Fergal Smith; Editing by Nick
Zieminski and Tom Brown)
  
 

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