May 27, 2020 / 8:34 PM / a month ago

CANADA FX DEBT-Loonie advances to 2-1/2-month high as risk appetite climbs

 (Adds dealer quotes and currency details; updates prices)
    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches its strongest since March 12 at 1.3727
    * Price of U.S. oil decreases 4.5%
    * Canadian bond yields trade mixed across a flatter curve

    By Fergal Smith
    TORONTO, May 27 (Reuters) - The Canadian dollar strengthened
against the greenback on Wednesday to its highest level in about
two-and-a-half months as rising risk appetite helped to offset a
pullback in oil prices.    
    Shares on Wall Street rose as hopes that the global economy
would recover from the coronavirus crisis overshadowed worries
of tensions between the United States and China.             
    Canada runs a current account deficit so the loonie tends to
benefit from an improved outlook for the global flow of capital.
    "There's a bit more of a general risk-on tone," said Scott
Lampard, head of global markets at HSBC Bank Canada. "I think
there is a bit of a distorted effect in risk assets as a result
of a huge amount of liquidity that is surging through markets."
    The Bank of Canada along with other major central banks has
slashed interest rates and is engaged in a large-scale
bond-buying program.
    The Canadian dollar        was up 0.2% at 1.3755 to the
greenback, or 72.70 U.S. cents. The currency touched its
strongest intraday level since March 12 at 1.3727.
    U.S. crude oil futures        settled 4.5% lower at $32.81 a
barrel, pressured by U.S.-China tensions. Still, oil has
rebounded from extreme low levels in April.
    The currency market is seeing less "fiscal strain" for
Canada now that oil has rebounded, Lampard said.    
    Canada's immigration minister expects the flow of people
coming to live and work in the country to be a driver of
economic growth following the coronavirus crisis, but economists
say there may be fewer jobs waiting for them.             
    Canadian housing starts will likely see a decline of 51% to
75% in 2020 from pre-COVID-19 levels, the national housing
agency said.             
    Canadian government bond yields were mixed across a flatter
curve on Wednesday, with the 2-year            up 1.3 basis
points at 0.321%.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Grant
McCool)
  
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