April 29, 2020 / 8:01 PM / 3 months ago

CANADA FX DEBT-Canadian dollar notches biggest gain in three weeks as oil surges

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar gains 0.8% against the greenback
    * Loonie touches its strongest since April 15 at 1.3886
    * Price of U.S. oil settles 22% higher
    * Canadian bond yields trade mixed across a flatter curve

    By Fergal Smith
    TORONTO, April 29 (Reuters) - The Canadian dollar posted its
biggest increase in three weeks against its U.S. counterpart on
Wednesday as a jump in oil prices and improving financial
conditions boosted the outlook for Canada's commodity-linked
economy.
    At 3:27 p.m. (1927 GMT), the Canadian dollar          was
trading 0.8% higher at 1.3887 to the greenback, or 72.01 U.S.
cents, its largest gain since April 7. The currency touched a
two-week high intraday at 1.3886.    
    The Canadian dollar is benefiting from "a surge in West
Texas Intermediate (oil) prices," said Karl Schamotta, chief
market strategist at Cambridge Global Payments. "Also, behind
the scenes we are seeing continued signs of easing in financial
conditions."
    Financial conditions are the state of financial variables,
such as corporate bond spreads and the performance of equity
markets, that help determine the strength of the economy.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so improvement in the
global flow of trade or capital could be particularly helpful
for its economy.
    Wall Street stock indexes surged as hopes rose for an
effective COVID-19 treatment and the Federal Reserve left key
interest rates near zero, vowing to use a "full range" of its
tools to aid the economy.             
    U.S. crude oil futures        settled 22% higher at $15.06 a
barrel after U.S. crude stockpiles grew less than expected and
gasoline posted a surprise draw, feeding optimism that fuel
consumption will recover as some European countries and U.S.
states ease coronavirus lockdowns.             
    Canada is being more cautious than some other countries in
opening up its economy. About two-thirds of Canadian businesses
say they cannot survive more than six months of
physical-distancing restrictions designed to slow the spread of
the novel coronavirus, a crowdsourcing survey said.             
       
    Canada's GDP report for February is due on Thursday but
could be too dated to guide expectations for further easing
measures from the Bank of Canada.    
    Canadian government bond yields were mixed across a flatter
curve, with the 10-year yield             falling 1.2 basis
points to 0.563%.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)
  
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