August 10, 2018 / 8:22 PM / 2 months ago

CANADA FX DEBT-C$ hits two-week low as emerging-market wobbles offset jobs gain

 (New throughout)
    * Canadian dollar at C$1.3126, or 76.18 U.S. cents
    * Loonie touches its weakest level since July 25 at C$1.3152
    * Bond prices rise across a flatter yield curve
    * Canada-U.S. 2-year spread hits narrowest mark since May 31

    By Fergal Smith
    TORONTO, Aug 10 (Reuters) - The Canadian dollar weakened to
a more than two-week low against the greenback on Friday as the
threat of an economic crisis in Turkey spreading to other
countries rattled global financial markets, offsetting
stronger-than-expected domestic jobs data.
    A plunge in the Turkish lira rocked global equities and
emerging markets (EM) and fear of more turmoil sent investors
scurrying for safety in assets like the yen and U.S. government
bonds.             
    "The EM contagion is really what's driving the bus," said
Alvise Marino, FX strategist at Credit Suisse in New York. "It
(the Canadian dollar) is just reacting to the general risk-off
that you are seeing across FX."
    Canada exports many commodities and runs a current account
deficit so its economy could be hurt if the flow of trade or
capital slows.
    The country unexpectedly added 54,100 jobs in July and the
unemployment rate dipped to equal a record low 5.8 percent, but
analysts said the data was weaker than it appeared.
    "The growth numbers were good but the pullback in earnings
gave people some pause," Marino said.
    Average hourly wages rose by 3.0 percent from a year
earlier, its smallest annual gain since December.
    At 3:41 p.m. EDT (1941 GMT), the Canadian dollar         
was trading 0.6 percent lower at 1.3126 to the greenback, or
76.18 U.S. cents. The currency touched its weakest level since
July 25 at C$1.3152.
    The loonie, which has been buffeted in recent days by a
diplomatic row between Saudi Arabia and Canada, was on track to
fall 1 percent for the week, its biggest decline since June.
    Speculators cut bearish bets on the Canadian dollar for the
fourth straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. As of Aug. 
7, net short positions had fallen to 24,898 contracts from
31,569 a week earlier.
    U.S. crude oil futures        settled 1.2 percent higher at
$67.63 a barrel but were still lower for the week. Oil is one of
Canada's major exports.      
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 3.5 Canadian cents to yield 2.097 percent and
the 10-year             climbed 36 Canadian cents to yield 2.292
percent.
    The gap between Canada's 2-year yield and its U.S.
counterpart narrowed by 3.1 basis points to a spread of 50.7
basis points in favor of the U.S. bond, its narrowest since May
31.

 (Reporting by Fergal Smith in Toronto
Editing by Matthew Lewis)
  
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