May 26, 2017 / 8:54 PM / 3 months ago

CANADA FX DEBT-C$ strengthens as oil rebounds; bearish bets hit record

 (Adds analyst quotes, details on CFTC data, background, updates
prices)
    * Canadian dollar at C$1.3460, or 74.29 U.S. cents
    * Loonie gains 0.4 percent for the week
    * Bond prices higher across a flatter yield curve
    * Gap between 2- and 10-year yields hits narrowest in 6
months

    By Fergal Smith
    TORONTO, May 26 (Reuters) - The Canadian dollar strengthened
on Friday against its U.S. counterpart, adding to this week's
gains as oil recovered some lost ground, while data showed that
bearish bets on the loonie rose to a fresh record high.
    U.S. crude        prices settled 90 cents higher at $49.80 a
barrel. They had plunged on Thursday following an Organization
of the Petroleum Exporting Countries-led decision to extend
current production curbs that investors gauged did not go far
enough to reduce a global supply glut.      
    "It's all about oil," said Michael Goshko, Corporate Risk
Manager at Western Union Business Solutions.
    Oil is one of Canada's major exports.
    Speculators increased net short positions in the Canadian
dollar to 99,109 contracts as of May 23 from 98,000 a week
earlier, data from the Commodity Futures Trading Commission and
Reuters calculations showed.
    Those investors who had been selling the loonie "got
squeezed big time," Goshko said.
    The currency got a boost on Wednesday when the Bank of
Canada was more upbeat than investors had expected as it left
interest rates unchanged at 0.5 percent.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.3460 to the greenback, or 74.29 U.S. cents, up
0.2 percent. For the week, it rose 0.4 percent.
    The loonie has recovered from a 14-month low plumbed this
month at C$1.3793. On Thursday, it touched its strongest in five
weeks at C$1.3388.
    Gains for the loonie came even as the U.S. dollar       
climbed against a basket of major currencies. Data showed that
U.S. economic growth slowed less sharply in the first quarter
than initially thought.             
    Canada's gross domestic product data for the first quarter
is due next week. Economists forecast that the economy grew at a
3.6 percent annualized pace after a strong expansion in the
second half of 2016.         
    Still, Canada sends 75 percent of its exports to the United
States and could suffer badly from a renegotiation of the North
American Free Trade Agreement or implementation of a proposed
U.S. border adjustment tax.
    Some customers say they are seeing reduced spending by
American companies due to trade uncertainty, Goshko said.
    Canadian government bond prices were higher across a flatter
yield curve, with the 10-year             rising 21 Canadian
cents to yield 1.439 percent.
    The gap between the 2- and 10-year yields narrowed by 1.8
basis points to a spread of 72.6 basis points, its narrowest
since Nov. 8.

 (Reporting by Fergal Smith; Editing by W Simon and James
Dalgleish)
  
 

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