May 14, 2020 / 7:36 PM / 3 months ago

CANADA FX DEBT-Canadian dollar recovers as financial review produces no 'bombshells'

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches its weakest intraday level since May 7 at
    * Canadian manufacturing sales fall 9.2% in March
    * Canadian bond yields ease across the curve

    By Fergal Smith
    TORONTO, May 14 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Thursday, rebounding from an
earlier one-week low as Wall Street fluctuated and the Bank of
Canada said that measures taken to ease financial market strains
were working.    
    In an annual review of Canada's financial systems, the
central bank said that "access to liquidity has greatly improved
in key financial markets" even as it expressed concern over
vulnerabilities in the energy sector.             
    "I don't think there were any bombshells in there that made
us think that things were worse than we thought," said Amo
Sahota, director at Klarity FX in San Francisco.
    The central bank has slashed interest rates to near zero and
introduced a range of measures to support financial market
functioning during the coronavirus crisis, including its first
ever large-scale bond-buying program.    
    The Canadian dollar          was trading 0.2% higher at
1.4066 to the greenback, or 71.09 U.S. cents. The currency
touched its weakest intraday level since May 7 at 1.4140.
    The recovery for the loonie came as U.S. stock markets
clawed back their earlier declines, while the price of oil
      , one of Canada's major exports, rallied more than 8% to
$27.39 a barrel.
    "I'd still be worried about the coming sessions and worried
about the loonie getting a little bit more weakness," Sahota
said. "You just have to look at the manufacturing sales data
from early in the session."    
    Canadian manufacturing sales in March slumped by 9.2%, the
biggest drop in over 11 years, as the coronavirus pandemic
forced the shutdown of many businesses, Statistics Canada said.
Analysts had forecast a 5.7% decrease.             
    Ontario, Canada's most populous province, said it will
permit some retail stores as well as vehicle dealerships and
construction sites to reopen on May 19, while Canadian Prime
Minister Justin Trudeau unveiled new measures to support hard
hit sectors and the partial reopening of some national parks.
    Canadian government bond yields eased across the curve, with
the 10-year yield down 1.4 basis points at 0.532%.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Alistair Bell)
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