February 6, 2018 / 9:38 PM / 11 days ago

CANADA FX DEBT-C$ rebounds from near 4-week low as stocks rally

 (Adds analyst quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2512, or 79.92 U.S. cents
    * Loonie touches its weakest since Jan. 11 at C$1.2569
    * Oil prices fall 1.2 percent
    * Bond prices lower across a steeper yield curve

    By Fergal Smith
    TORONTO, Feb 6 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday, recovering from an
earlier near four-week low as a rebound for stocks offset lower
oil prices and domestic data showing a wider-than-expected trade
deficit.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading 0.2 percent higher at C$1.2512 to the greenback, or
79.92 U.S. cents.
    The currency's strongest level of the session was C$1.2505,
while it touched its weakest since Jan. 11 at C$1.2569.
    "We have seen this pretty remarkable volatility in equities
but it just hasn't translated into other segments of the
market," said Eric Theoret, currency strategist at Scotiabank.
"What stands out is how calm FX has been."
    U.S. stocks climbed in volatile trading following the
biggest one-day drops for the S&P 500 and the Dow in more than
six years.             
    Commodity-linked currencies, such as the Canadian dollar,
tend to underperform when stocks fall, because of the signal
that it sends on prospects for global economic growth.
    The loonie has retreated about 2 percent from its strongest
in more than four months on Wednesday at C$1.2250.
    The price of oil, one of Canada's major exports, fell on
Tuesday for a third day. U.S. crude oil futures        settled
1.2 percent lower at $63.39 a barrel.             
    Canada's trade deficit in December widened to C$3.19 billion
as imports grew faster than exports, Statistics Canada said.
Analysts had forecast a deficit of C$2.20 billion.
    Widening of the deficit toward the extreme levels seen in
2017 is a reason "we've been persistent bears on the $C," Nick
Exarhos, an economist at CIBC Capital Markets, said in a
research note.    
    In separate data, home sales in Toronto fell 22 percent in
January from a year and the growth of purchasing activity in
Canada slowed in January.                             
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 9 Canadian cents to
yield 1.839 percent and the 10-year             falling 57
Canadian cents to yield 2.365 percent.
    On Monday, the 10-year yield touched its highest intraday
level since May 2014 at 2.393 percent.
    Bank of Canada Senior Deputy Governor Carolyn Wilkins on
Thursday will give a speech, which could offer the next clues on
the outlook for interest rates. Canada's employment report for
January is due on Friday.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and
Sandra Maler)
  
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