November 7, 2018 / 9:16 PM / 12 days ago

CANADA FX DEBT-C$ firms as potential U.S. political gridlock weighs on dollar

 (Adds portfolio manager quotes and details; updates prices)
    * Canadian dollar rises 0.1 percent against greenback
    * Price of U.S. oil falls 0.9 percent
    * Canadian bond prices trade mixed across a flatter yield
curve

    By Fergal Smith
    TORONTO, Nov 7 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Wednesday as the greenback
broadly fell after U.S. congressional elections, but gains for
the loonie were tempered by lower oil prices.
    At 3:51 p.m. (2051 GMT), the Canadian dollar          was
trading 0.1 percent higher at 1.3113 to the greenback, or 76.26
U.S. cents. The currency touched its strongest level since
Friday at 1.3057 before paring its gains.
    The U.S. dollar        slumped to its lowest intraday in
more than two weeks against a basket of major currencies after
the election outcome of a U.S. Congress split between
Republicans and Democrats raised expectations that any major
fiscal policy boost to the economy is unlikely for now.
            
    "Given gridlock, you probably don't have as much scope for
stimulus as you might otherwise have had," said David
Stonehouse, head of fixed income, North American & specialty
equities at AGF Investments Inc. "I think it is a more benign
outcome for Canada than potentially a Republican sweep might
have been when it comes to trade relations."
    Canada sends about 75 percent of its exports to the United
States. It has reached a deal with the U.S. and Mexico to revamp
the North American Free Trade Agreement, but the agreement
included no assurance that Washington would lift punitive
measures it imposed on Canadian steel and aluminum in June.
            
    The price of oil, one of Canada's major exports, continued a
recent slide after surging U.S. crude output hit another record
and domestic inventories rose more than expected.             
    U.S. crude oil futures settled 0.9 percent lower at $61.67 a
barrel.
    "It is always in the back of people's minds that, to some
extent at least, Canada is a petro-currency, and undeniably oil
has been soft recently and that hasn't helped the Canadian
dollar's cause," Stonehouse said.
    Canadian purchasing activity expanded at a faster pace in
October as measures of employment and inventories rose,
according to Ivey Purchasing Managers Index data. The seasonally
adjusted index rebounded to 61.8 after having slumped in
September to 50.4, its lowest in more than two years.
            
    Canadian government bond prices were mixed across a slightly
flatter yield curve. The 10-year             rose 4 Canadian
cents to yield 2.529 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Grant McCool)
  
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