August 8, 2017 / 8:36 PM / 4 months ago

CANADA FX DEBT-C$ holds near three-week lows as oil cools

    * Canadian dollar at C$1.2665 or 78.96 U.S. cents
    * Longer-term bond prices lower across the maturity curve

    By Solarina Ho
    TORONTO, Aug 8 (Reuters) - The Canadian dollar firmed
modestly against its U.S. counterpart on Tuesday, but remained
near the three-week lows set a day earlier as oil prices eased
and data showed slower trade growth in China and Germany.
    Disappointing trade data from the two countries suggested
global demand may be starting to flag just as central banks
contemplate reducing stimulus. Slower global demand could weigh
on commodity-linked currencies, such as the Canadian dollar.
    At 4:00 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.2665 to the greenback, or 78.96 U.S. cents, up
0.1 percent.
    The currency traded between C$1.2652 and C$1.2705 during the
session. On Monday, when Canada's stock and bond markets were
closed for a public holiday, the loonie touched its weakest
since July 14 at C$1.2715.
    "The market oversold on the USD/CAD over the past couple of
weeks, so we're probably rightsizing that a little bit for the
time being," said Don Mikolich, executive director, foreign
exchange sales at CIBC World Markets.
    The traditional correlation between the Canadian dollar and
the price of oil, a main Canadian export, also appeared to
tighten again after breaking down recently.
    "Now that we see ... the Fed and the Bank (of Canada) move
more or less in tandem on rate hikes for the next little, that
takes the rate spread argument out of the picture a bit," said
Mikolich.
    "I think oil prices probably can play bigger roll again."
    Oil prices, which cracked above $50 a barrel for the first
time in several weeks, struggled to find traction above $49 a
barrel as exports from some OPEC producers rose and despite news
of lower crude shipments from Saudi Arabia. U.S. crude       
prices were down 0.53 percent to $49.13 a barrel.      
    Longer-term Canadian government bond prices were lower
across the maturity curve, with the two-year            price
down 2.5 Canadian cents to yield 1.256 percent and the benchmark
10-year             falling 13 Canadian cents to yield 1.937
percent.
    The Canada-U.S. two-year bond spread stood at -10.3 basis
points, while the 10-year spread was at -33.4 basis points.
    Domestic housing data is awaited this week. Reports on
housing starts for July and building permits for June are due on
Wednesday while the June new housing price index is set for
Thursday.

 (Reporting by Solarina Ho; Additional reporting by Fergal
Smith; editing by Grant McCool)
  
 

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