April 28, 2017 / 9:42 PM / in 8 months

CANADA FX DEBT-C$ hits new 14-month low as uncertain trade outlook weighs

    * Canadian dollar ends at C$1.3650, or 73.26 U.S. cents
    * Loonie touches a fresh 14-month low at C$1.3697
    * Currency loses 2.6 percent for the month
    * Bond prices rise across the yield curve

 (Adds CFTC data)
    By Fergal Smith
    TORONTO, April 28 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, retaining this week's
defensive bias in the face of an uncertain trade outlook, while
domestic data showed the economy stalled in February.
    The currency's          official close, which was published
for the last time by the Bank of Canada, was C$1.3650 to the
greenback, or 73.26 U.S. cents, weaker than Thursday's close of
C$1.3624, or 73.40 U.S. cents.        
    "It is all about trade, which has been whipping the currency
around," said Amo Sahota, director at Klarity FX in San
Francisco.
    U.S. President Donald Trump told Reuters on Thursday that he
had been "psyched" to terminate the North American Free Trade
Agreement with Canada and Mexico on Saturday, but then changed
his mind after their leaders asked for it to be renegotiated
instead. He said he will not hesitate to change course again and
pull the plug if the negotiations become "unserious."
            
    The Canadian dollar's strongest level of the session was
C$1.3625, while it touched its weakest since February 2016 at
C$1.3697. For the week, the loonie fell 1.1 percent and for the
month, it was down 2.6 percent.
    The underlying trend has been for a weaker Canadian dollar
and that has been supported by fundamentals, such as widening
yield spreads, Sahota said.
    Canada's 2-year yield has fallen this week nearly 8 basis
points further below its U.S. equivalent to a spread of -54.9
basis points, nearly its biggest gap since January 2016.
    Liquidity issues at a non-bank mortgage lender, unrelated to
actual performance, added to pressure on the loonie this week,
according to a research note by Avery Shenfeld, at CIBC Capital
Markets.
    Speculators have increased bearish bets on the Canadian
dollar to the most since February 2016, data from the Commodity
Futures Trading Commission and Reuters calculations showed.
Canadian dollar net short positions jumped to 42,642 contracts
as of April 25 from 33,252 a week earlier.
    Canadian gross domestic product was flat in February,
matching the forecast by analysts in a Reuters poll, after
robust growth in January.             
    "It is a soft month in an otherwise solid quarter," said
Derek Holt, head of capital markets economics at Scotiabank.
    U.S. crude oil prices        settled 36 cents higher at
$49.33 a barrel, rebounding from a one-month low the previous
day.             
    Canadian government bond prices were higher across the yield
curve, with the 10-year             rising 25.8 Canadian cents
to yield 1.546 percent.

 (Reporting by Fergal Smith; Editing by Nick Zieminski, Sandra
Maler and Jonathan Oatis)
  
 

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