June 6, 2019 / 7:19 PM / a month ago

CANADA FX DEBT-C$ climbs to 2-week high as trade data boosts economic outlook

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar rises 0.3% against the greenback
    * Canada posts narrowest trade deficit in six months
    * Price of U.S. oil increases 1.8%
    * Canadian bond prices fall across a flatter yield curve

    By Fergal Smith
    TORONTO, June 6 (Reuters) - The Canadian dollar strengthened
to a two-week high against its U.S. counterpart on Thursday, as
the greenback broadly declined and trade data added to evidence
that Canada's economy is picking up.
    Rising exports and falling imports helped shrink Canada's
trade deficit in goods in April to C$966 million, Statistics
Canada said, in the latest sign the economy is recovering from a
slowdown. April's trade deficit was the smallest since October
last year.             
    "I think in general the data from Canada has been supportive
(of the Canadian dollar), even the latest GDP figures, which
showed solid domestic demand and a good March monthly GDP,
showing the economy perhaps regained momentum going into Q2,"
said Eric Viloria, an FX strategist at Crédit Agricole CIB.
    The pace of purchasing activity in Canada showed steady
growth in May as a measure of employment rose to a nine-month
high, according to Ivey Purchasing Managers Index data.
            
    Canada's jobs report for May is due on Friday.    
    The U.S. dollar       , which has been pressured this week
by speculation that the Federal Reserve would cut interest
rates, lost ground against a basket of major currencies. The
decline for the greenback came as the ECB refrained from hinting
at an interest rate cut, boosting the euro       .
    At 2:57 p.m. (1857 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3371 to the greenback, or 74.79 U.S.
cents. The currency touched its strongest level since May 22 at
1.3360.
    Still, the Canadian dollar is likely to strengthen less than
previously expected against its U.S. counterpart over the coming
year, because of more attractive valuations and better prospects
for return in other currencies, a Reuters poll showed.
            
    Gains for the loonie on Thursday came as U.S. stocks got a
boost from a report that the United States is considering a
delay to the imposition of tariffs on Mexican products that
President Donald Trump has threatened to put in place on Monday.
             
    Investors worry that the tariffs could undermine chances of
a new North American trade deal coming into force. Canada sends
about 75% of its exports, including oil, to the United States.
    The price of oil rebounded from a five-month low in the
previous session. U.S. crude oil futures        settled 1.8%
higher at $52.59 a barrel.             
    Canadian government bond prices were lower across much of a
flatter yield curve, with the 10-year             falling 13
Canadian cents to yield 1.461%.

 (Reporting by Fergal Smith; Editing by David Gregorio and
Sandra Maler)
  
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