October 29, 2018 / 9:21 PM / 17 days ago

CANADA FX DEBT-C$ weakens for 3rd straight day as stocks and oil slide

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar dips 0.2 percent against the greenback
    * Price of U.S. oil falls 0.8 percent
    * Bond prices trade mixed across the yield curve
    * Canada-U.S. 2-year spread widens by 1.4 basis points

    By Fergal Smith
    TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened for
the third consecutive day against its U.S. counterpart on Monday
as stocks and oil prices declined, while the greenback broadly
climbed.
     U.S. stocks fell in a volatile session, hurt by fresh
worries of an escalation of the U.S.-China trade war and a sharp
drop in big tech and internet names.             
    "The Canadian dollar tends to be more risk sensitive, so (I
am) not surprised to see it lower," said Erik Nelson, a currency
strategist at Wells Fargo.
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt if the
global flow of trade or capital slows.
    Oil prices fell after Russia signaled that output will
remain high and as concern over the global economy fueled
worries about demand for crude. U.S. crude oil futures       
settled 0.8 percent lower at $67.04 a barrel.             
    The U.S. dollar        climbed against a basket of
currencies. News that German Chancellor Angela Merkel will not
seek re-election as head of her CDU party weighed on the euro.
            
    At 4:48 p.m. (2048 GMT), the Canadian dollar          was
trading 0.2 percent lower at 1.3129 to the greenback, or 76.17
U.S. cents.
    The currency, which on Friday hit a six-week low intraday at
1.3160, traded in a range of 1.3083 to 1.3149.
    The loonie got a boost last Wednesday from a Bank of Canada
interest rate hike but has lost ground on the three subsequent
days of trading.
    The central bank raised interest rates for the fifth time
since July 2017 and said it might speed up the pace of future
hikes given that the economy was running at almost full capacity
and did not need any stimulus.             
    Speculators have cut bearish bets on the Canadian dollar to
the lowest since March, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed on Friday. As
of Oct. 23, net short positions had decreased to 7,228 contracts
from 11,019 a week earlier.             
    Canadian government bond prices were mixed across the yield
curve, with the two-year            up 0.5 Canadian cent to
yield 2.264 percent and the 10-year             falling 1
Canadian cent to yield 2.396 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 1.4 basis points to a spread of 55.8 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith
Editing by Frances Kerry and Phil Berlowitz)
  
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