February 22, 2019 / 10:04 PM / 10 months ago

CANADA FX DEBT-C$ notches 2-week high on rising U.S.-China trade deal hopes

 (Adds strategist quotes and details, updates prices)
    * Loonie rises 0.7 percent against the U.S. dollar
    * For the week, the Canadian dollar rises 0.8 percent
    * Canadian retail sales fall 0.1 percent in December
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Feb 22 (Reuters) - The Canadian dollar strengthened
to its highest in more than two weeks against the greenback on
Friday, as hopes rose for a trade deal between the United States
and China and as domestic data showed a lower-than-expected drop
in retail sales.    
    At 4:36 p.m. (2136 GMT), the Canadian dollar          was
trading 0.7 percent higher at 1.3144 to the greenback, or 76.08
U.S. cents, its biggest gain this month.
    The currency touched its strongest level since Feb. 6 at
1.3134. For the week, it was up 0.8 percent.
    "It is less about the loonie and more about the U.S. dollar,
generally driven by a combination of dovish Fedspeak and
optimism on trade," said Eric Theoret, a currency strategist at
Scotiabank. "It's helping all of the commodity currencies."
    The Federal Reserve will keep an open mind as it begins a
broad review this year of its monetary policy framework that
could result in changes to how it goes about ensuring that
prices remain stable and employment plentiful, Fed vice chair
Richard Clarida said.             
    U.S. President Donald Trump said that he expects to meet
China's leader, Xi Jinping, soon and said they may nail down the
final points of a trade deal.              
    Canada exports many commodities, including oil, so its
economy could benefit from an improved outlook for global trade.
    Oil touched its highest since mid-November as hopes of a
U.S.-China trade deal offset a new record U.S. oil supply. U.S.
crude oil futures        settled up 0.5 percent at $57.26 a
barrel.                 
    Canadian retail sales fell by 0.1 percent in December from
November to C$50.35 billion, due to lower gasoline prices,
Statistics Canada said. Analysts had forecast a 0.3 percent
decrease.             
    In volume terms, retail sales increased 0.2 percent.
    "The slight increase in volumes will see monthly GDP
tracking forecasts around the 0.0 percent mark for December,
which isn't great, but is better than what we had been fearing
heading into the week," Royce Mendes, a senior economist at CIBC
Capital Markets, said in a research note.
    Data from the U.S. Commodity Futures Trading Commission and
Reuters calculations showed that speculators cut their bearish
bets on the Canadian dollar.             
    As of Feb. 5, net short positions had fallen to 42,037
contracts from 56,390 in the prior week.
    Canadian government bond prices were higher across a flatter
yield curve, with the 10-year             rising 28 Canadian
cents to yield 1.891 percent.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and Tom
Brown)
  
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