February 14, 2018 / 9:29 PM / 3 months ago

CANADA FX DEBT-C$ notches 1-week high as stock market volatility cools

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2503, or 79.98 U.S. cents
    * Loonie touches a one-week high at C$1.2502
    * Oil prices rise 2.4 percent
    * Bond prices fall across the yield curve

    By Fergal Smith
    TORONTO, Feb 14 (Reuters) - The Canadian dollar strengthened
to a one-week high against its U.S. counterpart on Wednesday as
a rally in stocks suggested that the turbulence in financial
markets is fading.
    At 4:05 p.m. EST (2100 GMT), the Canadian dollar         
was trading 0.7 percent higher at C$1.2503 to the greenback, or
79.98 U.S. cents.
    The currency's weakest level of the session was C$1.2649,
while it touched its strongest since Feb. 7 at C$1.2502.
    U.S. stocks rose as investors shrugged off
stronger-than-expected inflation data and a surprise drop in
January retail sales, which shifted the focus from rising
inflation to the prospect of stagflation.     
    The VIX index       , a popular options-based gauge of
expected stock market volatility, hit its lowest since Feb. 5.
    Canada's commodity-linked currency had fallen as much as 3.3
percent after Wall Street lurched sharply lower earlier this
month.
    "That period of turbulence is starting to dissipate," said
Eric Theoret, a currency strategist at Scotiabank. "With the
skies becoming a bit clearer, it does pave the way for the
fundamental moves that we and many market participants are
expecting."
    Moves that Theoret is looking for include broad-based U.S.
dollar weakness and strength in commodities on strong global
growth.
    The price of oil, one of Canada's major exports, rebounded
from earlier losses after U.S. crude stocks rose less than
expected and Saudi Energy Minister Khalid al-Falih said major
oil producers would prefer tighter markets than to end supply
cuts too early.             
    U.S. crude oil futures        settled 2.4 percent higher at
$60.60 a barrel, while the U.S. dollar        fell against a
basket of major currencies. 
    In domestic data, the Teranet-National Bank Composite House
Price Index, which measures changes for repeat sales of
single-family homes, showed prices rose 0.3 percent in January
from a month earlier. But the pace of gains continued to
decelerate on a year-over-year basis.             
    The Canadian Real Estate Association will release its
monthly home sales report on Thursday. Canada's manufacturing
sales report for December is due on Friday.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
was down 8.5 Canadian cents to yield 1.829 percent and the
10-year             declined 27 Canadian cents to yield 2.374
percent.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Grant McCool)
  
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