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CANADA FX DEBT-C$ hits 2-week low against a surging greenback
December 15, 2016 / 9:42 PM / 9 months ago

CANADA FX DEBT-C$ hits 2-week low against a surging greenback

(Adds strategist comment, Bank of Canada on housing, updates
prices to close)
    * Canadian dollar settles at C$1.3347, or 74.92 U.S. cents
    * Loonie touches its weakest since Dec. 1 at C$1.3376
    * Bond prices lower across the yield curve

    By Alastair Sharp
    TORONTO, Dec 15 (Reuters) - The Canadian dollar weakened to
a two-week low against its U.S. counterpart before paring some
losses on Thursday, pressured by broader gains for the greenback
and weaker-than-expected domestic manufacturing data.
    The Canadian dollar settled at C$1.3347 to the
greenback, or 74.92 U.S. cents, weaker than Wednesday's close of
C$1.3274, or 75.34 U.S. cents. At one point it touched C$1.3416,
its weakest since Dec. 1.
    "We're seeing the aftershock of yesterday's Fed decision
continuing to ripple across the market," said Karl Schamotta,
director of foreign exchange risk and strategy at Cambridge
Global Payments.
    "At the same time we're seeing additional skepticism around
rebalancing in the crude market," he said. "Inventories moving
up are weighing on the Canadian dollar."
    Losses in the past two sessions have wiped out roughly half
of the gains the loonie had made against the greenback since oil
prices starting rallying in mid-November. 
    The U.S. dollar charged to a 14-year high and
government bond yields rose sharply after the Federal Reserve on
Wednesday hiked U.S. interest rates and signaled more increases
would follow at a faster pace next year. 
    The Bank of Canada, which is widely expected to hold rates
steady throughout 2017, said that the risk of a sharp correction
in Canada's housing market and financial stress on households
has increased in the last six months but new mortgage rules
would reduce the nation's vulnerability. 
    Sales of Canadian homes fell 5.3 percent in November from
October, a report from the Canadian Real Estate Association
showed. 
    Prices of oil, a major Canadian export, settled little
changed on the day after sliding to their lowest in a week. A
stronger U.S. dollar, in which oil is traded, tends to hit crude
demand as it makes fuel purchases more expensive for users of
other currencies.
    Canadian manufacturing sales fell by 0.8 percent in October
from September, Statistics Canada data showed. Analysts had
expected sales to increase by 0.4 percent. 
    Canadian government bond prices fell across the yield curve,
with the two-year down 3 cents to yield 0.824 percent
and the benchmark 10-year falling 30 Canadian cents
to yield 1.830 percent.
    The 2-year yield fell 2 basis points below its U.S.
equivalent to a spread of -45.2 basis points.
    Strategists expect the spread to widen to as much as 80
basis points by the end of 2017 as the Bank of Canada shows no
desire to follow Fed rate increases. 
    

 (Reporting by Fergal Smith; Editing by Nick Zieminski and
Meredith Mazzilli)

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