May 26, 2020 / 7:57 PM / 2 months ago

CANADA FX DEBT-C$ surges to 2-month high as economic reopening pressures bears

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 1.5% against the greenback
    * Loonie hits strongest level since March 16 at 1.3757
    * Price of U.S. oil settles 3.3% higher
    * Canadian bond yields rise across a steeper curve

    By Fergal Smith
    TORONTO, May 26 (Reuters) - The commodity-linked Canadian
dollar strengthened to a two-month high against its U.S.
counterpart on Tuesday as steps to reopen the world economy
boosted investor sentiment and some investors that were short
the loonie covered their positions.
    World shares forged ahead and commodity markets drove higher
as investors disregarded Sino-U.S. tensions to focus on the
easing of lockdowns and a potential coronavirus vaccine.
            
    "You have all the components of CAD strength kicking-in,
risk appetite, big dollar and oil," said Greg Anderson, global
head of foreign exchange strategy at BMO Capital Markets.
    The U.S. dollar        tumbled nearly 1% against a basket of
major currencies, while the price of oil, one of Canada's major
exports, was supported by growing confidence that producers are
following through on commitments to cut supplies. U.S. crude
       prices settled 3.3% higher at $34.35 a barrel.
            
    The Canadian dollar          was trading 1.5% higher at
1.3765 to the greenback, or 72.65 U.S. cents, its biggest gain
since March 25. The currency touched its strongest intraday
level since March 16 at 1.3757.
    Some of the currency's gains could have been due to
short-covering, after the most recent data from the Commodity
Futures Trading Commission showed that speculators have
increased their bearish bets on the loonie to the most since
June last year.
    "When we broke through 1.3850 and 1.3800 that's a lot of
pain," Anderson said. "I'm sure people are getting squeezed out
of short CAD positions and will likely continue to exit those
positions over the next few days."
    Bank of Canada Governor Stephen Poloz and Senior Deputy
Governor Carolyn Wilkins are due to appear before the Standing
Senate Committee on National Finance at 5 p.m. (2100 GMT).
    Canadian government bond yields were higher across a steeper
yield curve. The 10-year yield             rose 7.1 basis points
to 0.560%.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
David Gregorio)
  
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