TORONTO (Reuters) - The Canadian dollar was little changed against the U.S. dollar on Tuesday as the market tried to gauge how lofty commodity prices will affect Canada’s economy, while key domestic jobs data due later this week also limited moves.
Domestic bond prices, amid a dearth of data incentives, were down across the curve as the Bank of Canada marked the effective end of a funding crunch in Canadian money markets.
At 10:00 a.m. EDT, the Canadian unit was at C$1.0202 to the U.S. dollar, or 98.02 U.S. cents, down slightly from C$1.0189 to the U.S. dollar, or 98.15 U.S. cents, at Monday’s close.
With no Canadian data due until the June housing starts report is released on Wednesday, the Canadian currency was steady as the market considered how lofty commodity prices could hurt global demand for key Canadian exports such as oil.
Amid a backdrop of equity market concerns, traders tried to assess what that would mean for the global economic outlook and demand for Canada’s main exports.
“That brings in something which is of, we think, more direct concern to the Canadian dollar and that’s the overall demand for commodities over the next year or two,” said David Watt, senior currency strategist at RBC Capital Markets.
“But the reason we are not getting specific traction on the Canadian dollar causing it to weaken off is we still have oil near $140 (a barrel) and it’s still uncertain how the global economy is going to fall out.”
U.S. light crude oil prices fell more than 3 percent to about $136 a barrel, down considerably from last week’s record high near $146 a barrel, and that took the Canadian dollar down slightly as well.
But moves in the Canadian dollar are likely to be limited ahead of the key report of the week - Canadian jobs data for June - due out on Friday.
The June employment figures, the last data the Bank of Canada will consider ahead of its next scheduled interest rate decision on July 15, are expected to show the economy created 10,000 jobs in June with an unemployment rate of 6.1 percent.
Canadian bond prices were mostly lower after the Bank of Canada decided not to roll over a Purchase and Resale Agreement and said the domestic market had improved since April.
This comes on the heels of the bank’s Business Outlook Survey on Monday, which pointed to increased inflationary risks and spurred talk of interest rate hikes.
“The announcement with the Bank of Canada today kind of reinforces the Business Outlook Survey’s observations yesterday about firms perceiving less of a headwind coming from tighter credit conditions,” said Michael Gregory, senior economist at BMO Capital Markets.
“What it does suggest is to the extent that the credit squeeze was a factor contributing to the Bank of Canada cutting rates, that it’s no longer a factor arguing for them to cut rates.”
The overnight Canadian Libor rate was 3.0500 percent, unchanged from Monday.
Monday’s CORRA rate was 2.9936 percent, up from 2.9895 percent on Friday. The Bank of Canada publishes the previous day’s rate around 9 a.m. daily.
The two-year bond dipped 2 Canadian cents to C$101.07 to yield 3.161 percent. The 10-year bond was down 10 Canadian cents at C$102.38 to yield 3.683 percent.
The yield spread between the two-year and 10-year bond was 52.2 basis points, up from 52.0 at the previous close.
The 30-year bond fell 5 Canadian cents to C$116.30 for a yield of 4.039 percent. In the United States, the 30-year Treasury yielded 4.491 percent.
The three-month when-issued T-bill yielded 2.46 percent, down from 2.49 percent at the previous close.
Editing by Bernadette Baum