October 18, 2019 / 8:53 PM / 2 months ago

CANADA FX DEBT-Loonie posts 11-week high as investors weigh election uncertainty

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.1% against the greenback
    * Loonie ends the week up 0.6%
    * Bullish bets on the loonie increase to a 4-week high
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Oct 18 (Reuters) - The Canadian dollar climbed to
its strongest in more than two months against a broadly weaker
U.S. counterpart on Friday but gains for the currency were
tempered by an uncertain outlook for Canada's federal election
on Monday.
    Polls show Prime Minister Justin Trudeau's Liberals are
locked in a tie with the opposition Conservatives and will not
capture enough seats for a majority. That could leave them in a
weakened position, reliant on smaller parties to govern.
    "I think there is probably some squaring up ahead of that
event (the vote)," said Mark McCormick, North American head of
FX strategy at TD Securities. "It could go in two directions,
which could be currency moving."
    A Conservative majority could be positive for the currency,
while a Liberal minority government that relies on the support
of the New Democratic Party (NDP) could be negative, McCormick
said.
    The left-leaning NDP has said it is opposed to the expansion
of a flagship oil pipeline, Trans Mountain.
    At 4:23 p.m. (2023 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3124 to the greenback, or 76.20 U.S.
cents. The currency touched its strongest intraday level since
July 31 at 1.3119.
    For the week, the loonie was up 0.6% after Britain reached a
deal to avoid a disorderly divorce from the European Union that
could have hurt the global economy.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so its economy could
benefit from a pick-up in global growth.
    U.S. crude oil futures        settled 0.3% lower, pressured
by concerns about China's economy.             
    Speculators have raised their bullish bets on the Canadian
dollar to the highest since mid-September, data from the U.S.
Commodity Futures Trading Commission and Reuters calculations
showed. As of Oct. 15, net long positions had increased to
12,961 contracts from 5,313 in the prior week.    
    The Teranet-National Bank Composite House Price Index rose
0.1% in September from August. After correcting for seasonal
pressure, the index was higher for the second straight month.
            
    The Bank of Canada, which will make its next interest rate
decision on Oct. 30, has said that housing activity has
recovered more quickly than expected, helped by lower mortgage
rates.        
    Canadian government bond prices were higher across a flatter
yield curve, with the 10-year             rising 13 Canadian
cents to yield 1.546%. On Thursday, the 10-year yield reached a
three-month high intraday at 1.608%.  

 (Reporting by Fergal Smith
Editing by Chizu Nomiyama and Alistair Bell)
  
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