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CANADA FX DEBT-C$ holds on as greenback notches strong gains
January 3, 2017 / 10:03 PM / 9 months ago

CANADA FX DEBT-C$ holds on as greenback notches strong gains

(Adds strategist comment, updates prices to close)
    * Canadian dollar settles at C$1.3433, or 74.44 U.S. cents
    * Bond prices lower across the yield curve

    By Alastair Sharp
    TORONTO, Jan 3 (Reuters) - The Canadian dollar made a slight
gain against a much stronger U.S. counterpart on Tuesday,
holding in despite a sharp reversal in prices for crude oil, a
major Canadian export.
    But the loonie, as Canada's currency is colloquially known,
could face a resumption of pre-holiday weakness later this week,
 according to Scotiabank currency strategist Eric Theoret.
    Canada's trade report for November and employment numbers
for December are due on Friday, following data released just
before Christmas that showed cooling inflation and a contraction
in economic growth. 
    "The risk is to more disappointment and more of an
adjustment in terms of the currency," Theoret said.
    A weak trade number would likely force the Bank of Canada to
tweak its outlook when it makes its next rate decision and
issues a monetary policy report on Jan. 18, he said.
    "To me, it's way overdue for them to acknowledge they have
been wrong," said Theoret.
    The Canadian dollar settled at C$1.3433 to the
greenback, or 74.44 U.S. cents, barely stronger than Monday's
close of C$1.3438, or 74.42 U.S. cents, according to Reuters
data.
    The currency's strongest level of the session was C$1.3399,
while its weakest was C$1.3461.
    The Bank of Canada's official close on Friday, the last
trading day of 2016, was C$1.3427, or 74.48 U.S. cents.
    The loonie rose 3 percent in 2016, its first annual gain
since 2012.
    Oil, one of Canada's major exports, reached 18-month highs
in morning trade before retreating as the greenback hit its
highest level against a basket of currencies since late 2002 on
the back of data showing solid growth in U.S. manufacturing and
as upbeat Chinese data helped boost global stock markets.
  
    Speculators slashed bearish bets on the Canadian dollar for
the second straight week, according to Commodity Futures Trading
Commission data and Reuters calculations. Net short Canadian
dollar positions fell to 1,598 contracts as of Dec. 27 from
11,754 a week earlier.        
    Canadian government bond prices were lower across the yield
curve, with the two-year price down 3 Canadian cents
to yield 0.763 percent and the benchmark 10-year 
falling 24 Canadian cents to yield 1.742 percent.
    In mid-December, the 10-year yield touched its highest in 17
months at 1.859 percent.
    

 (Additional reporting by Fergal Smith; Editing by Tom Brown)

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