March 3, 2017 / 10:08 PM / 6 months ago

CANADA FX DEBT-Oil gain helps stronger C$ at end of tough week

 (Adds analyst comment, Fed details, updates prices to close)
    * Canadian dollar ends at C$1.3379, or 74.74 U.S. cents
    * Loonie touches its weakest since Jan. 4 at C$1.3437
    * Currency falls more than 2 pct on week
    * Bond prices mixed across the yield curve

    By Alastair Sharp
    TORONTO, March 3 (Reuters) - The Canadian dollar made a
slight gain against its U.S. counterpart on Friday but posted
its sharpest weekly decline versus the greenback since May as
the two countries' central banks extended the divergence in
their policy views.
    The loonie, as the Canadian currency is colloquially known,
hit a nearly two-month low before turning stronger as rising oil
prices lent support. It lost more than 2 percent over the week.
    "The Canadian dollar was beaten up this week as the Federal
Reserve unambiguously signaled an imminent rate hike while the
Bank of Canada insisted it's in no rush to get off the floor,"
said Adam Button, currency analyst at ForexLive in Montreal.
    The loonie          settled near its strongest level of the
day at C$1.3379 to the greenback, or 74.74 U.S. cents on Friday,
compared to Thursday's close of C$1.3399, or 74.63 U.S. cents,
and after touching its weakest since Jan. 4 at C$1.3437.
    U.S. Federal Reserve Chair Janet Yellen capped off a
seemingly coordinated push with comments that cemented the view
that the Fed will raise interest rates at its March 14-15
meeting, and likely be able to move faster after that than it
has in years.             
    Comments from other Fed speakers earlier this week had
already pushed market pricing of a March hike to 80 percent.
    Meanwhile, the Bank of Canada on Wednesday held rates steady
as it stayed focused on the "significant uncertainties" facing
the economy, including the policies of U.S. President Donald
Trump.             
    "The Bank of Canada is being extremely cautious despite
excellent economic data since the start of the year," Button
said.
    Data from Thursday showing Canada's economy grew more than
expected in the fourth quarter was seen as unlikely to shift the
Bank of Canada's stance.             
    Policy divergence will pressure the loonie over the coming
months, a Reuters poll predicted.             
    Oil prices surged on Friday, as a weaker U.S. dollar
encouraged buying, but investors remained cautious after Russian
production figures showed weak compliance with a global deal to
cut output.      
    Global benchmark Brent         settled up 82 cents, or 1.5
percent, to $55.90 a barrel, while WTI futures        rose 72
cents to $53.33 a barrel, a 1.4 percent gain.
    Oil is one of Canada's major exports.
    Canadian government bond prices were mixed across the yield
curve, with the two-year            up 1.5 Canadian cents to
yield 0.765 percent and the 10-year             falling 3
Canadian cents to yield 1.700 percent.

 (Additional reporting by Fergal Smith; Editing by Lisa
Shumaker)
  
 

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