TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Monday in a move that was magnified by light trading as investors squared their year-end balance sheets.
Canadian bond prices rose as investors sought the safety of government debt amid declining equity markets.
At 9:54 a.m. EST, the Canadian dollar was at C$1.0090 to the U.S. dollar, or 99.11 U.S. cents, up from C$1.0170 to the U.S. dollar, or 98.33 U.S. cents, on Friday.
The Canadian dollar fell as low as 97.76 U.S. cents in the overnight session before reversing direction.
“At the overnight lows, some buyers emerged in London, and given the thin market conditions, it led to a reversal in the overnight selloff, and that carried into the morning session,” said David Watt, senior currency strategist at RBC Capital Markets.
The move was based on technical levels and not due to fundamentals, said Watt. The price of oil was lower, which would normally be a negative for the Canadian dollar, as Canada is a major oil producer and exporter. Domestic data was not favorable for the Canadian dollar either, Watt said.
The data showed that foreign divestment of Canadian securities hit a record high in October as some Canadian portfolio shares were withdrawn from markets after being taken over by foreign interests, Statistics Canada said.
Nonresidents lowered their Canadian holdings by C$24.32 billion, selling a record C$23.44 billion worth of stocks.
“(It‘s) largely a story for currency markets in that it is helping to flesh out some of the details behind the rather substantial appreciation in CAD in the month of October -- flow related as takeovers crowded in demand for the currency,” said Stewart Hall, market strategist at HSBC Canada in a note.
Canadian bond prices rose as investors sought the safety of government debt as equities markets declined.
The main event for the bond market during the week will be inflation data, to be released on Tuesday, said Carlos Leitao, chief economist at Laurentian Bank of Canada.
“The prevailing view is that Canadian inflation trends resemble U.S. inflation, which is not the case,” said Leitao.
“And so when the numbers come out tomorrow, I think that will probably wake people up. And it will give the Bank of Canada all sorts of room to cut rates.”
The overnight Canadian Libor rate was at 4.25 percent, unchanged from Friday.
Friday’s CORRA rate was 4.2603 percent, down from 4.2828 percent on Thursday.
The two-year bond rose 5 Canadian cents to C$100.61 to yield 3.920 percent. The 10-year bond added 22 Canadian cents to C$99.10 to yield 4.115 percent.
The yield spread between the two-year and 10-year bond moved to 17.7 basis points from 19.3 at the previous close.
The 30-year bond rose 53 Canadian cents to C$113.49 to yield 4.198 percent. In the United States, the 30-year treasury yielded 4.618 percent.
The three-month when-issued T-bill yielded 3.91 percent, unchanged from the previous close.
Editing by Bernadette Baum