July 27, 2018 / 8:46 PM / 2 months ago

CANADA FX DEBT-C$ holds on to this week's gains after robust U.S. data

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar at C$1.3061, or 76.56 U.S. cents
    * Speculators cut bearish bets on the Canadian dollar
    * Loonie is on track to rise 0.7 percent for the week 
    * Bond prices lower across the yield curve

    By Fergal Smith
    TORONTO, July 27 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Friday as the loonie
held on to this week's gains even after data showed the U.S.
economy expanded at its fastest clip in nearly four years.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.3061 to the greenback, or
76.56 U.S. cents.
    The currency, which on Wednesday touched its highest level
in nearly six weeks at C$1.3025, traded in a narrow range of
C$1.3041 to C$1.3080.
    For the week, the loonie is on track to rise 0.7 percent. It
has been boosted by stronger-than-expected domestic data and
easing of trans-Atlantic trade tensions.
    Canada runs a current account deficit, so its economy could
be hurt if the flow of trade or capital slows.
    "The big takeaway this week has been the Canadian dollar
outperforming," said Amo Sahota, director at Klarity FX in San
Francisco.
    Penetration by USD-CAD this week of a rising trend line
since April has set the market up for additional Canadian dollar
appreciation over the coming weeks, Sahota said.
    Canada is in talks with Mexico and the United States to
revamp the North American Free Trade Agreement (NAFTA). Mexico
and the United States agreed on Thursday to step up talks on
updating NAFTA in hopes of reaching an agreement on major issues
by August.             
    Additional "positive noises" on NAFTA could boost
expectations for another Bank of Canada interest rate increase
as soon as October, said Sahota.
    The central bank has raised its benchmark interest rate
twice this year to sit at 1.50 percent. Money markets see a
greater-than 60 percent chance of an October hike.           
    Speculators have cut bearish bets on the Canadian dollar for
the second straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. As of July
24, net short positions had fallen to 44,511 contracts from
47,484 a week earlier.
    The U.S. dollar        slipped against a basket of
currencies as the robust U.S. data failed to erase worries that
trade frictions would be a drag in the second half of 2018.
            
    U.S. crude oil futures        settled 1.3 percent lower at
$68.69 a barrel. Oil is one of Canada's major exports.
            
    Canadian government bond prices were lower across the yield
curve, with the 10-year             falling 3 Canadian cents to
yield 2.296 percent.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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