January 8, 2020 / 8:35 PM / 5 months ago

CANADA FX DEBT-Canadian dollar weakens to 8-day low as oil prices slide

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.2% against the greenback
    * Price of U.S. oil declines nearly 5%
    * Canadian bond prices fall across the yield curve

    By Fergal Smith
    TORONTO, Jan 8 (Reuters) - The Canadian dollar fell to an
eight-day low against its U.S. counterpart on Wednesday, as oil
prices tumbled on fading alarm over an Iran rocket strike and
the greenback broadly climbed.
    At 2:46 p.m. (1946 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3029 to the greenback, or 76.75 U.S.
cents. The currency touched its weakest intraday level since
Dec. 31 at 1.3043.
    "The weakness in oil prices has been a key contributor.
Also, the strength in the U.S. dollar," said Mathieu Savary,
strategist at BCA Research.
    The price of oil, one of Canada's main exports, fell in a
wild swing, soaring close to a four-month high in early trade on
an Iranian rocket attack on U.S. forces in Iraq before
retreating as Iran and the United States quickly ratcheted back
tensions.
    U.S. crude oil futures settled nearly 5% lower at $59.61 a
barrel, while strengthening of the U.S. dollar        was led by
gains against the safe-haven yen       .
                        
    Some recent weak domestic economic indicators have also
weighed on the Canadian dollar, Savary said. Official data on
Tuesday showed that Canada's exports and imports both declined
in November. 
    Canada's employment report for December is due on Friday. In
November, the economy shed about 71,000 jobs.
    Bank of Canada Governor Stephen Poloz is due to speak on
Thursday, which could give investors clues on the interest rate
outlook. The central bank left its benchmark interest rate on
hold at 1.75% in 2019, when the loonie was the top performing
G10 currency, even as some other major central banks, such as
the Federal Reserve and the European Central Bank, eased.
    Canada is more dependent than some other countries, such as
the United States, on trade. So the loonie could benefit from
recent signs of global economic recovery and easing of trade
tensions between the United States and China.
    "Ultimately, we are in an environment that is cyclically
likely to turn very favorable for the Canadian dollar," Savary
said.
    Canadian government bond prices were lower across a steeper
yield curve on Wednesday in sympathy with U.S. Treasuries. The
two-year            fell 5.5 Canadian cents to yield 1.670% and
the 10-year             was down 42 Canadian cents to yield
1.630%.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Jonathan Oatis)
  
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