April 6, 2018 / 8:55 PM / 2 months ago

CANADA FX DEBT-C$ retreats from five-week high as stocks and oil slide

 (Adds strategist quotes, details throughout; updates prices)
    * Canadian dollar at C$1.2769, or 78.31 U.S. cents
    * Loonie posts strongest since Feb. 27 at C$1.2732
    * Canada adds 32,300 jobs in March
    * Bond prices rise across flatter yield curve

    By Fergal Smith
    TORONTO, April 6 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, pulling back from an
earlier five-week high, as sliding stock and oil prices offset
stronger-than-expected domestic jobs data.
    Wall Street was pressured by renewed U.S.-China trade
tensions and by the prospect of more Federal Reserve interest
rate hikes.                 
    "The markets are very fast assessors of situations and so I
think that (decline in stocks) has weakened the Canadian dollar
off," said Amo Sahota, director at Klarity FX in San Francisco.
    Canada's commodity-linked currency is sensitive to movement
in stock markets due to the signal it can send about the global
economic outlook.
    The price of oil, one of Canada's major exports, was also
hurt by trade tensions. U.S. crude oil futures settled 2.3
percent lower at $62.06 a barrel.             
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.1 percent lower at C$1.2769 to the greenback, or 78.31
U.S. cents.
    But the currency, which rose 1 percent for the week, had
earlier touched its strongest intraday since Feb. 27 at         
C$1.2732.
    Investors expect the Canadian dollar's advance to extend
over the coming year due to improved prospects for a revamped
North American Free Trade Agreement, a Reuters poll of currency
strategists showed.             
    "There is this changing of sentiment with how people are
viewing Canada and Canada's economics," Sahota said.
    Canada created 32,300 jobs in March, Statistics Canada said,
topping economists' forecasts for an increase of 20,000.
            
    Still, speculators have raised bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of April 3, net short
positions had increased to 31,872 contracts from 27,050 a week
earlier.
    The U.S. dollar        fell after a report showed the U.S.
economy in March created the fewest jobs in six months.
            
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 3.5 Canadian cents to yield 1.79 percent and the
10-year             climbed 31 Canadian cents to yield 2.142
percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 1.8 basis points to a spread of -48 basis
points.

 (Reporting by Fergal Smith
Editing by Tom Brown)
  
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