December 13, 2019 / 8:32 PM / 7 months ago

CANADA FX DEBT-Canadian dollar clings to weekly gain as greenback's appeal fades

 (Adds dealer quotes and details throughout, updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Price of U.S. oil increases by 1.5%
    * Canadian household debt-to-income widens to 174.0%
    * Canada's 10-year yield touches a six-month high at 1.695%

    By Fergal Smith
    TORONTO, Dec 13 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Friday but held near an earlier
five-week high as the reduction of some global investment risks
weighed on the greenback.
    The U.S. dollar        weakened against a basket of major
currencies, pressured by the sapping of safe-haven demand after
the announcement of an initial trade deal between the United
States and China and an election victory for Britain's
Brexit-backing Conservative Party.             
    "I think CAD was caught in this broader U.S. dollar move,"
said Simon Côté, managing director, risk management solutions at
National Bank Financial. "We are at risk of seeing more dollar
weakness and I just advise our clients not to be complacent."
    Historically cheap rates for the market's pricing of
expected volatility showed that investors were not prepared for
a major move in the U.S. dollar, even though it was testing key
support levels against a number of major currencies, including
euro       , sterling        and the Mexican peso       , Côté
said.
    Canadian dollar six-month volatility          was trading at
an annualized rate of less than 4.5%, which was near a record
low.
    At 3:06 p.m. (2006 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3189 to the greenback, or 75.82 U.S.
cents. The currency touched its strongest intraday level since
Nov. 6 at 1.3151.
    For the week, the loonie was up 0.5%.
    The price of oil, one of Canada's major exports, rose to its
highest in nearly three months as investors cheered progress in
resolving the U.S.-China trade dispute and a decisive general
election result in Britain. U.S. crude oil futures       
settled 1.5% higher at $60.07 a barrel.                 
    The ratio of Canadian household debt-to-income widened to
174.0% in the third quarter from a downwardly revised 173.4% in
the second quarter, Statistics Canada said.             
    The Bank of Canada has worried that an interest rate cut
could add to near record levels of household indebtedness.
    On Thursday, Bank of Canada Governor Stephen Poloz said a
recent weakening in Canada's labor market, underscored by major
job losses in November, is unlikely to weigh heavily on future
monetary policy decisions.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 7 Canadian cents to yield 1.663% and the 10-year
            was up 77 Canadian cents to yield 1.585%.
    Earlier in the day, the 10-year yield touched its highest
level since May 23 at 1.695%.    

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Nick
Zieminski)
  
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