July 14, 2017 / 8:56 PM / 3 years ago

CANADA FX DEBT-C$ notches 14-month as data shows bearish bets slashed

    * Canadian dollar at C$1.2650, or 79.05 U.S. cents
    * Loonie touches its highest since May 2016 at C$1.2645
    * Currency gains 1.8 percent for the week as bearish bets
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, July 14 (Reuters) - The Canadian dollar touched a
14-month high against its U.S. counterpart on Friday as gains
for oil added to support for the currency from higher interest
rates, while data showed that bearish bets on the loonie have
been slashed.
    Speculators cut bearish bets on the loonie for a seventh
straight week, data from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed. Canadian dollar net
short positions fell to 8,604 contracts as of July 11 from
39,372 contracts a week earlier.
    Gains for the loonie, which rose for a third straight week,
came after the Bank of Canada raised rates on Wednesday for the
first time in seven years and signaled it will need to hike
again over the coming months.    
    "If you are a trader or a corporate and have to judge where
the market might be going, you pretty much have to take the bank
at its word," said Michael Goshko, Corporate Risk Manager at
Western Union Business Solutions.
    The central bank will follow up with another increase in
October as it charts a course of gradual policy tightening, with
two more hikes expected next year, according to a Reuters poll
of primary dealers.                     
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.2650 to the greenback, or 79.05 U.S. cents, up
0.6 percent.
    Prices of oil, one of Canada's major exports, were boosted
by lower U.S. stockpiles, a slight slowdown in U.S. crude
production and signs of increased Chinese demand. U.S. crude
       prices settled 46 cents higher at $46.54 a barrel.       
    The currency's weakest level of the session was C$1.2747,
while it touched its strongest since May 2016 at C$1.2645.
    For the week, the loonie rose 1.8 percent. It has gained
more than 6 percent since the Bank of Canada turned hawkish in
    "Until we start seeing weakening economic data I think the
market is going to be full steam ahead to higher rates and a
stronger Canada" dollar, Goshko said.
    The U.S. dollar        fell against a basket of major
currencies after weaker-than-forecast data on consumer prices
and retail sales in June raised doubts about whether the Federal
Reserve would raise interest rates again in 2017.              
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
price rose 3.5 Canadian cents to yield 1.192 percent and the
10-year             gained 11 Canadian cents to yield 1.897

 (Reporting by Fergal Smith, editing by G Crosse)
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