January 2, 2018 / 9:49 PM / in 4 months

CANADA FX DEBT-C$ climbs against U.S. dollar; oil near 2-1/2-year peak

 (Adds trader comment, update prices)
    * Canadian dollar at C$1.2507, or 79.96 U.S. cents
    * Bond prices lower across the yield curve

    By Alastair Sharp
    TORONTO, Jan 2 (Reuters) - The Canadian dollar strengthened
to a 10-week high against its U.S. counterpart on Tuesday, the
first trading day of 2018, as the greenback broadly fell and the
price of oil held near its highest in 2-1/2 years.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2507 to the greenback, or 79.96 U.S. cents, up
0.6 percent from Friday's close. It traded between C$1.2500, its
strongest level since Oct. 20, and C$1.2557 during the session.
    The currency rose nearly 7 percent in 2017.
    The loonie, as the Canadian currency is colloquially known,
has gained steadily versus the greenback since mid-December as
part of a broader U.S. dollar retreat, which one corporate
trader said may be prompting Canadian exporters to trim their
targets to the high C$1.20s from the low C$1.30s previously.
    It's put "a significant seed of doubt in the minds of
Canadian exporters," said Brad Schruder, director of corporate
sales and structuring at BMO Capital Markets.
    He said Friday's Canadian employment report for December
will be a key piece of data to help the Bank of Canada decide
whether to hike rates in January or to wait for later in the
year. Bets are slightly in favor of a hold-steady decision.
    The U.S. dollar        retreated against a basket of major
currencies as data showing a faster pace of euro zone
manufacturing activity boosted the euro.             
    The price of oil, one of Canada's major exports, touched its
highest intraday since mid-2015 amid large anti-government
rallies in Iran and ongoing supply cuts led by OPEC and Russia,
before settling slightly lower.             
    Still, speculators have cut bullish bets on the Canadian
dollar to the lowest since July, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed on
Friday. As of Dec. 26, net long positions had fallen to 17,346
contracts from 45,901 a week earlier.
    Canadian government bond prices were lower across the yield 
curve, with the two-year            down 3 Canadian cents to
yield 1.703 percent and the benchmark 10-year            
falling 30 Canadian cents to yield 2.079 percent.

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and Tom Brown)
  
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