CANADA FX DEBT-C$ rebounds from 11-year lows as traders book profits

September 24, 2015 Reuters

By Solarina Ho

TORONTO, Sept 24 The Canadian dollar eked out a gain against its U.S. counterpart on Thursday, reversing losses after the currency earlier touched its weakest level against the greenback in more than 11 years on concerns about global growth.

The loonie, which first broke through key technical levels on Wednesday on cheap crude and disappointing domestic retail sales data, has tumbled some 25 percent since last summer, tracking the price of oil, a major Canadian export.

“A lot of the movement that we’re seeing with the loonie has to do with technical positioning,” said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary.

“Obviously, with retail sales yesterday coming in a bit softer than expected, that’s really piled on in terms of the dovish commentary and outlook for the Canadian dollar.” The Canadian dollar extended losses overnight and early Thursday morning as Norway and Taiwan’s central banks both cut their benchmark interest rates on Thursday.

The Canadian dollar ended at C$1.3318 to the greenback, or 75.09 U.S. cents, stronger than the Bank of Canada’s official close of C$1.3347, or 74.92 U.S. cents on Wednesday.

The currency had softened to C$1.3417, or 74.53 U.S. cents earlier in the session, its weakest level since June 2004.

“We’ve had a bit of exhaustion … we’ve seen a lot of corporate sellers coming into the market and take advantage of that,” said Smith about the currency’s reversal.

Investors will next be digesting a speech by Federal Reserve Chair Janet Yellen, searching for any clues that may provide some clarity on the timing of a liftoff in U.S. interest rates. While a number of market participants are still betting on a move sometime this year, worries about global growth could keep the Fed more cautious.

Canadian government bond prices were higher across the maturity curve, with the two-year price up 2.7 Canadian cents to yield 0.510 percent and the benchmark 10-year rising 19 Canadian cents to yield 1.471 percent.

The Canada-U.S. two-year bond spread was -17.4 basis points, while the 10-year spread was -65.7 basis points.

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