July 27, 2017 / 8:53 PM / in 4 months

CANADA FX DEBT-C$ gives back post-Fed gains as greenback rebounds on data

    * Canadian dollar at C$1.2558 or 79.63 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, July 27 (Reuters) - The Canadian dollar retreated
against the greenback on Thursday after touching a two-year
high, as its U.S. counterpart rebounded on a slew of U.S. data
that indicated an acceleration in growth during the second
quarter.
    The U.S. dollar also firmed against the euro, the British
pound and other currencies after troughing earlier following a
more dovish-than-expected U.S. Federal Reserve policy statement
on Wednesday.
    "Today it's taking part in the broad (U.S.) dollar
corrective move," said Bipan Rai, executive director and senior
macro strategist at CIBC Capital Markets. "So I don't think it's
anything endogenous to Canada itself."
    At 4:00 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.2558 to the greenback, or 79.63 U.S. cents, down
0.9 percent. The currency, which rallied to more than two-year
highs following the Fed statement, traded between C$1.2414 and 
C$1.2575.
    A combination of a weak greenback, strong Canadian economic
data and rate hike expectations have propelled the loonie some
10 percent over the last three months. Bond yields climbed to
multi-year highs earlier this week, while U.S.-Canada 2-year
bond yields' spread has narrowed sharply in recent weeks.
    Prices of oil, a key Canadian export, have also climbed to
near eight-week highs, though analysts say the traditional
correlation between the currency and oil have broken down
recently.
    Given the currency's surge in recent months and expectations
the Bank of Canada will raise interest rates one more time this
year fully priced into the market, analysts do not expect the
Canadian dollar to rally much further.
    "Judging by the price action on the technical chart, we do
think there's more scope for further correction in the U.S.
dollar," said Rai.
   In the United States, the greenback bounced after data showed
 new orders for U.S.-made capital goods unexpectedly fell in
June. Gut shipments showed a fifth straight monthly increase.
Other data showed a sharp narrowing in the goods trade deficit
in June, and increases in both retail and wholesale inventories.
            
    Canadian government bond prices were mostly lower across the
maturity curve, with the two-year            price down 1.5
Canadian cents to yield 1.3 percent and the benchmark 10-year
            falling 26 Canadian cents to yield 1.999 percent.
    The Canada-U.S. two-year bond spread stood at -6.7 basis
points, while the 10-year spread was at -31.9 basis points.

 (Reporting by Solarina Ho; Editing by Dan Grebler)
  
 

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