April 26, 2019 / 8:45 PM / 5 months ago

CANADA FX DEBT-Loonie rises as U.S. growth composition weighs on greenback

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.2% against the greenback
    * Loonie falls 0.5% for the week
    * Price of U.S. oil drops 2.9%
    * Canada-U.S. 2-year spread hits narrowest in more than two
weeks

    By Fergal Smith
    TORONTO, April 26 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Friday, following
data that showed factors driving faster growth in the U.S.
economy that are likely to be temporary.
    U.S. economic growth accelerated in the first quarter, but
the burst in growth was driven by trade and the largest
accumulation of unsold goods since 2015, factors that are likely
to reverse in the coming quarters.             
    "Really it is all about the market's response to the GDP
numbers we got out of the U.S. this morning," said Eric Theoret,
a currency strategist at Scotiabank. "It hasn't been much of a
loonie related move so much as a U.S. dollar move."
    The U.S. dollar        fell against a basket of currencies,
while the price of oil, one of Canada's major exports, retreated
from its strongest bull run in at least a year after U.S.
President Donald Trump again pressured the Organization of the
Petroleum Exporting Countries to raise crude production to ease
gasoline prices.                         
    U.S. crude        prices settled 2.9% lower at $63.30 a
barrel.
    Speculators have cut their bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of April 23, net short
positions had fallen to 47,493 contracts after rising to the
highest since January at 49,162 in the prior week.
    At 4:17 p.m. (2017 GMT), the Canadian dollar          was
trading 0.2% higher at 1.3458 to the greenback, or 74.31 U.S.
cents. The currency, which on Wednesday touched a nearly
four-month low at 1.3522, traded in a range of 1.3452 to 1.3498.
    Gains for the loonie came after Bank of Canada Governor
Stephen Poloz said on Thursday that the central bank could start
raising rates again "sometime down the road.".             
    On Wednesday, the Bank of Canada held rates steady but took
a more dovish stance than in recent releases, removing wording
around the need for "future hikes," while lowering its growth
forecasts for 2019.             
    For the week, the loonie fell 0.5%.    
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 1 Canadian cent to yield 1.545% and the 10-year            
climbed 17 Canadian cents to yield 1.687%.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 3.9 basis points to a spread of 74.1
basis points in favor of the U.S. bond, the narrowest since
April 9.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Marguerita Choy)
  
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