CANADA FX DEBT-C$ strengthens in commodity-linked rally

June 10, 2015 Reuters

by Leah Schnurr

TORONTO/OTTAWA, June 10 The Canadian dollar strengthened to a nearly three-week high against the greenback on Wednesday, boosted by a rise on oil prices as volatility in currency markets favored the commodity-linked loonie.

The Canadian currency also benefited from broad pressure on the U.S. dollar as the Japanese yen soared after the country’s central bank chief called it “very weak.”

Oil prices rose for a second day in a row after data showed a big drawdown in domestic crude stockpiles and U.S. crude settled up $1.29 at $61.43 a barrel. As oil is a major export for Canada, the currency often moves in tandem with oil prices.

“It’s creating an environment whereby currencies, most noticeably commodity-bloc currencies, are gaining quite substantially,” said Jack Spitz, managing director of foreign exchange at National Bank Financial.

The Canadian dollar ended the North American session at C$1.2262 to the greenback, or 81.55 U.S. cents, stronger than Tuesday’s close of C$1.2346, or 81.00 U.S. cents.

It was the fourth session in a row that the loonie has strengthened and the day’s gain pushed it toward some key technical levels.

After touching a high of C$1.2202, the Canadian dollar retreated with strong support for the U.S. dollar-Canadian dollar pairing around those levels, said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary.

If Thursday’s U.S. retail sales data comes in softer than expected, that could see the Canadian dollar break past the C$1.22 level, Smith said.

At home, investors will also be taking in domestic data on first-quarter capacity utilization and the new home price index for April.

Canadian government bond prices were lower across the maturity curve, with the two-year down 3-1/2 Canadian cents to yield 0.683 percent and the benchmark 10-year down 20 Canadian cents to yield 1.902 percent.

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