March 10, 2017 / 9:41 PM / 9 months ago

CANADA FX DEBT-C$ rises as jobs gain tempers expected policy divergence

 (Adds quote, details on Ross and Trudeau comments, CFTC data,
updates prices)
    * Canadian dollar ends at C$1.3463, or 74.28 U.S. cents
    * Bond prices end mixed across flatter yield curve

    By Fergal Smith
    TORONTO, March 10 (Reuters) - The Canadian dollar
strengthened on Friday against its U.S. counterpart as solid
domestic jobs data tempered expectations for policy divergence
between the Bank of Canada and the Federal Reserve.
    The 15,300 increase in Canadian jobs in February easily
topped economists' expectations for a gain of 2,500 and extended
the labor market's recent strong run.             
    "The good times keep on rolling for the Canadian labor
market and the quality of employment also looks a little bit
firmer this month," said Nick Exarhos, economist at CIBC Capital
Markets.
    U.S. employers hired workers at a robust pace in February,
which could give the Fed the green light to raise interest rates
next week.             
    The Bank of Canada will be slower to raise rates than the
Fed but not as much as previously thought, said Hosen Marjaee,
senior managing director, Canadian fixed income at Manulife
Asset Management. 
    "We thought that the Bank (of Canada) may go (raise interest
rates) some time early in 2018 but that may be brought a little
bit closer."
    The gap between Canadian and U.S. 2-year yields narrowed 2.4
basis points to a spread of -51.6 basis points as expectations
receded for policy divergence.
    The Canadian dollar          ended at C$1.3463 to the
greenback, or 74.28 U.S. cents, stronger than Thursday's close
of C$1.3508, or 74.03 U.S. cents.
    The range for the currency was C$1.3421 to C$1.3514.
    Gains for the loonie came even as prices of oil, one of
Canada's major exports, fell on oversupply concerns. U.S. crude
       prices settled 79 cents lower at $48.49 a barrel.
            
    U.S. Commerce Secretary Wilbur Ross said he hopes to launch
formal talks to renegotiate the North American Free Trade
Agreement in a little over three months.             
    Canada sends about 75 percent of its exports to the United
States and could suffer badly if NAFTA is renegotiated or if a
proposed border adjustment tax is implemented.             
    Asked about potential repercussions if a tax were imposed,
Canadian Prime Minister Justin Trudeau said his government would
seek to protect the country's export jobs.                 
    Speculators trimmed bullish bets on the Canadian dollar,
data from the Commodity Futures Trading Commission showed.
Canadian dollar net long positions dipped to 29,220 contracts as
of March 7 from 30,090 a week earlier.     
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 2 Canadian cents
to yield 0.843 percent while the 10-year             was flat to
yield 1.813 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
James Dalgleish)
  
 

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