May 24, 2019 / 7:37 PM / 2 months ago

CANADA FX DEBT-Canadian dollar rises as investor risk aversion subsides

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar gains 0.3% against the greenback
    * Price of U.S. oil increases 1.2%
    * Loonie ends week up 0.2%
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, May 24 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday, recovering from a
six-day low the day before as the greenback broadly fell and
investors dialed back fears of a protracted trade war between
the United States and China.
    At 3:16 p.m. EDT (1916 GMT), the Canadian dollar         
was trading 0.3% higher at 1.3437 to the greenback, or 74.42
U.S. cents. The currency, which on Thursday touched its lowest
since May 17 at 1.3502, traded in a range of 1.3431 to 1.3481.
    For the week, the loonie was up 0.2%.
    "Going into the weekend we have seen some (U.S.) dollar
selling on the back of the soft data the last few days and a bit
of stability in the risk backdrop today," said Ronald Simpson,
managing director, global currency analysis for Action
Economics.
    The U.S. dollar        fell from a two-year high against a
basket of major currencies after orders for U.S.-made capital
goods fell, further evidence that manufacturing and the broader
economy are slowing, due in part to the U.S.-China trade
dispute.             
     Global stocks          rose, paring some of the previous
day's sharp decline, on cautious optimism after U.S. President
Donald Trump predicted a swift end to the tariff war with China.
            
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of capital or trade.
    The price of oil rose after two sessions of losses, but had
its biggest weekly drop this year due to rising inventories and
concerns about an economic slowdown. U.S. crude oil futures
       settled 1.2% higher at $58.63 a barrel.             
    The Bank of Canada is done raising interest rates until at
least the end of next year, with a serious risk of a cut by then
as policymakers become more wary of slowing growth and global
trade tensions, a Reuters poll showed on Friday.             
    Canadian government bond prices were higher across the yield
curve, with the 2-year            up 5 Canadian cents to yield
1.559% and the 10-year             rising 20 Canadian cents to
yield 1.620%.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 6.6 basis points to a spread of 60.9 basis
points in favor of the U.S. bond, as profit-taking weighed on
U.S. Treasuries ahead of a long holiday weekend in the United
States. At 54.3 basis points on Thursday, the spread was at its
narrowest since last November.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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