May 5, 2020 / 1:30 PM / 2 months ago

CANADA FX DEBT-C$ gains as oil jumps, hit to trade is less than feared

    * Canadian dollar rises 0.4% against the greenback
    * Canada's trade deficit widens to C$1.4 billion in March
    * Price of U.S. oil increases 13.5%
    * Canadian bond yields edge higher across the curve

    By Fergal Smith
    TORONTO, May 5 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday as the easing of
coronavirus lockdowns in some countries boosted oil prices and
domestic data showed that the trade deficit widened less than
expected in March.
    Canada's trade deficit widened to C$1.4 billion in March
from C$0.9 billion in February as both exports and imports
declined, Statistics Canada said. Analysts has expected a
deficit of C$2 billion.
    "The extent of the declines in both exports and imports was
not as pronounced as expected, leaving a smaller widening in the
deficit than feared," said Ryan Brecht, a senior economist at
Action Economics. "However, exports and imports should see sharp
declines in April as the economy saw a plunge in activity due to
the stay-at-home measures implemented to slow the pandemic."    
    One of Canada's major exports is oil. U.S. crude oil futures
       on Tuesday climbed 13.5% to $23.15 a barrel on hopes for
a recovery in vehicle traffic and fuel demand as some European
and Asian countries along with several U.S. states began to ease
restrictions that were put in place to contain the coronavirus
pandemic.             
    The province of Quebec, worst hit in Canada by the
coronavirus, began gradually reopening its economy on Monday but
pushed back plans for a restart in the city of Montreal, citing
health concerns.             
    At 8:51 a.m. (1251 GMT), the Canadian dollar          was
trading 0.4% higher at 1.4033 to the greenback, or 71.26 U.S.
cents. The currency, which has been pressured in recent days by
fears that last year's U.S.-China trade dispute will be
reignited, traded in a range of 1.4018 to 1.4094.
    Ottawa is rolling out about C$300 billion of economic
support measures, while the Bank of Canada has slashed interest
rates to 0.25%, matching a record low, and begun a large-scale
asset purchase program for the first time.
    On Monday, Bank of Canada Senior Deputy Governor Carolyn
Wilkins said that the bank stood ready to adjust its asset
purchases to support a lasting recovery.             
    Canadian government bond yields edged higher across the
curve on Tuesday, with the 10-year             up less than one
basis point at 0.579%.
    Canada's jobs report for April is due on Friday. 

 (Reporting by Fergal Smith; Editing by Andrea Ricci)
  
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