January 10, 2019 / 10:07 PM / 2 months ago

CANADA FX DEBT-C$ keeps most of its recent gains as oil prices rise

 (Adds investor quote and details on activity; updates prices)
    * Canadian dollar falls 0.2 percent against the greenback
    * Canadian new home prices were unchanged in November
    * Value of Canadian building permits rise 2.6 percent in
November 
    * Price of U.S. oil rises 0.4 percent
    * Canadian bond prices give back most of their gains

    By Fergal Smith
    TORONTO, Jan 10 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as the greenback
broadly climbed, but the loonie held on to most of its recent
gains as stocks and oil prices turned higher.    
    The price of oil, one of Canada's major exports, rose to a
nearly four-week high despite fading optimism of a trade deal
between the United States and China. U.S. crude oil futures
       settled 0.4 percent higher at $52.59 a barrel.
    Oil has rebounded about 24 percent since slumping in
December to an 18-month low.
    "One thing that is going for Canada right now is oil prices,
that a bit of a correlation is coming back, that with the rally
in the oil market we are benefiting," said Hosen Marjaee, senior
portfolio manager at Manulife Asset Management.
    The three-month correlation between the Canadian dollar and
oil has climbed to nearly 90 percent, according to Refinitiv
Eikon data, indicating that the currency and the commodity move
mostly in the same direction. For some months in 2018, the
correlation was negative.
    At 4:14 p.m. EST (2114 GMT), the Canadian dollar         
was trading 0.2 percent lower at 1.3235 to the greenback, or
75.56 U.S. cents. The currency traded in a range of 1.3203 to
1.3260.
    On Wednesday, the loonie touched a five-week low at 1.3180
as the Bank of Canada held interest rates steady, as expected,
but said more increases would be necessary even though low oil
prices and a weak housing market will harm the economy in the
short term.             
    New home prices in Canada were unchanged in November for the
fourth month in a row, matching the median forecast of analysts,
Statistics Canada said.             
    Separate data from Statistics Canada showed that the value
of Canadian building permits increased by 2.6 percent in
November from October. Analysts had expected a decrease of 0.5
percent.             
    Wall Street rose for its fifth straight day in a seesaw
session as investors responded to mixed comments by Federal
Reserve Chairman Jerome Powell.             
    Powell said the U.S. central bank has the ability to be
patient on policy given inflation is stable, but it would
"substantially" reduce the size of its balance sheet.
    Canadian government bond prices gave back most of their
earlier gains in sympathy with U.S. Treasuries. The 10-year
            rose 2 Canadian cents to yield 1.975 percent.
    On Wednesday, the 10-year yield touched its highest intraday
since Dec. 27 at 2.000 percent.

 (Reporting by Fergal Smith; 
Editing by Sandra Maler)
  
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