CANADA FX DEBT-C$ notches small gain in choppy trade
The Canadian dollar rose slightly against its U.S. counterpart on Thursday, reversing earlier losses as a potential move toward oil production cuts tempered a reduction in risk appetite.
The risk-sensitive commodity-linked currency fell to its lowest in more than a week as crude oil prices and stocks fell, then rebounded amid speculation that OPEC was moving closer to oil production cuts.
“It’s been a choppy day,” said Scott Smith at Cambridge Global Payments.
A renewed slump in banking and mining stocks weighed on risk appetite. Markets have worried this week that negative rates have hit banks’ ability to earn margins on interest rates.
U.S. oil prices fell for a sixth straight day, approaching 12-year lows hit last month, weighed by brimming crude inventories and a Goldman Sachs forecast that prices would remain low and volatile until the second half of the year.
Lower oil prices added to risk that the Bank of Canada will have more of a bias toward rate cuts, said Smith.
The Canadian dollar settled at C$1.3921 to the greenback, or 71.83 U.S. cents, slightly stronger than Wednesday’s official close of C$1.3933, or 71.77 U.S. cents.
The currency’s strongest level of the session was C$1.3884, while it hit its weakest since Feb. 3 at C$1.4018.
Against the safe-haven Japanese yen, the Canadian dollar touched its lowest since Jan. 20 at 79.27 yen.
Domestic data had little impact. New home prices edged up less than expected in December, while Canada’s job vacancy rate fell to 2.6 percent in the third quarter.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 2.5 Canadian cents to yield 0.368 percent and the benchmark 10-year falling 7 Canadian cents to yield 1.006 percent.
The 10-year yield hit a record low at 0.921 percent on the flight to safety during the session, after having dropped below 1 percent for the first time ever on Wednesday.
The Canada-U.S. two-year bond spread was 5.2 basis points less negative at -29.4 basis points, while the 10-year spread was 5.8 basis points less negative at -65.1 basis points as Treasuries outperformed.
The Canadian government could find it hard to balance the budget by 2019/20 as promised if the economy continues to struggle, Prime Minister Justin Trudeau said in an interview published on Thursday.
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