April 22, 2020 / 7:39 PM / a month ago

CANADA FX DEBT-Canadian dollar recovers some ground as oil rallies

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.2% against the greenback
    * Canada's annual inflation rate tumbles to 0.9%
    * Price of U.S. oil climbs about 19%
    * Canadian bond yields move higher across the curve

    By Fergal Smith
    TORONTO, April 22 (Reuters) - The Canadian dollar edged
higher against its U.S. counterpart on Wednesday as a rally in
oil prices overshadowed domestic data showing a five-year low
for inflation, with the loonie recovering from a near three-week
low the day before.
    The price of oil, one of Canada's major exports, was
bolstered by tentative discussions of additional supply cuts
from OPEC producers and U.S. inventory builds that were less
dire than some anticipated.             
    U.S. crude oil futures       , which crashed on Monday to
levels well below zero, settled 19.1% higher at $13.78 a barrel.
    "A little bit of positive trading in front crude contracts
(has helped the loonie) ... "but over time, I still expect the
Canadian dollar to drift lower," said Mazen Issa, a senior FX
strategist at TD Securities.
    Issa expects historically low crude prices to curb
production in Canada's oil patch, hurting Canada's economy,
which is already reeling from measures to help contain the
coronavirus outbreak.
    At 3:13 p.m. (1913 GMT), the Canadian dollar          was
trading 0.2% higher at 1.4181 to the greenback, or 70.52 U.S.
cents. The currency, which on Tuesday hit its weakest since
April 2 at 1.4263, traded in a range of 1.4115 to 1.4238.
    Canada's annual inflation rate tumbled to 0.9% in March as
the coronavirus crisis and an oil supply war slashed gasoline
prices, Statistics Canada said. Analysts had forecast a rate of
1.2%.             
    The Bank of Canada expects inflation to fall to near zero in
the second quarter. The central bank has slashed interest rates
by 150 basis points since March and has engaged in quantitative
easing for the first time, buying government bonds in large
scale.             
    Canadian government bond yields were higher across the curve
in sympathy with U.S. Treasuries, with the 10-year            
up 3.6 basis points at 0.618%.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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