January 6, 2020 / 8:51 PM / 14 days ago

CANADA FX DEBT-Canadian dollar strengthens as safe-haven bid eludes the greenback

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar rises 0.3% against the greenback
    * Price of U.S. oil increases 0.4%
    * Canadian producer prices rise by 0.1% in November 
    * Canadian bond prices fall across a steeper yield curve

    By Fergal Smith
    TORONTO, Jan 6 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Monday, approaching last week's
14-month high as oil prices rose on Middle East tensions and the
greenback lost ground against a basket of major currencies.
    At 3:23 p.m. (2023 GMT), the Canadian dollar          was
trading 0.3% higher at 1.2963 to the greenback, or 77.14 U.S.
cents. The currency, which last Tuesday notched its strongest
intraday level since October 2018 at 1.2952, traded in a range
of 1.2960 to 1.2990.
    The safe-haven yen        and Swiss franc        rose
against the U.S. dollar        on worries about a broader
escalation of conflict in the Middle East after the United
States killed Iran's most prominent military commander.
            
    "I think the (U.S.) dollar looks quite vulnerable here,"
said Shaun Osborne, chief currency strategist at Scotiabank. "It
is definitely not picking up too much support in a risk-off
environment and that may be because the U.S. is at the epicenter
of this."
    Narrowing differentials between U.S. and Canadian interest
rates and higher oil prices have added to support for the
Canadian dollar, Osborne said.
    U.S. crude oil futures        settled 0.4% higher at $63.27
a barrel on worries that tensions in the Middle East could
disrupt oil supplies.                
    Data from Statistics Canada showed that producer prices grew
by 0.1% in November from October on higher prices for meat, fish
and dairy products, as well as energy and petroleum products.
            
    Canada's trade data for November is due on Tuesday and
December jobs data is due on Friday, both of which could help
guide expectations for the Bank of Canada interest rate outlook.
    The central bank left its benchmark interest rate on hold at
1.75% in 2019 even as some other major central banks, such as
the Federal Reserve and the European Central Bank, eased. Bank
of Canada Governor Stephen Poloz is due to speak on Thursday.
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 4.5 Canadian
cents to yield 1.637% and the 10-year             falling 45
Canadian cents to yield 1.585%.
    The gap between Canada's 10-year yield and its U.S.
equivalent narrowed by 3 basis points to a spread of 22.2 basis
points in favor of the U.S. bond. 

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)
  
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