September 18, 2018 / 8:01 PM / 3 months ago

CANADA FX DEBT-C$ nears 3-week high as risk appetite rebounds

 (Adds money manager quote, details on activity; updates prices)
    * Canadian dollar touches its strongest since Aug. 30
    * Canadian factory sales rise 0.9 percent in July
    * Price of U.S. oil rises 1.4 percent
    * Canada's 10-year yield touches a nearly 4-month high

    By Fergal Smith
    TORONTO, Sept 18 (Reuters) - The Canadian dollar
strengthened to a nearly three-week high against its U.S.
counterpart on Tuesday as stock and oil prices climbed, while
domestic manufacturing data supported the view the Bank of
Canada would raise interest rates in October.
    At 3:31 p.m. (1931 GMT), the Canadian dollar          was
trading 0.4 percent higher at 1.2985 to the greenback, or 77.01
U.S. cents. The currency touched its strongest level since Aug.
30 at 1.2972.
    Gains for the loonie came as investors on Wall Street
shrugged off escalating trade rhetoric between the United States
and China.             
    "We are seeing a rebound in risk appetite and the Canadian
dollar is getting dragged along with that," said Scott Smith,
managing partner at Viewpoint Investment Partners. 
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt if the
global flow of trade or capital slows.
    Oil was boosted by signs that OPEC would not be prepared to
raise output to address shrinking supplies from Iran, and as
Saudi Arabia signaled an informal target near current levels.
            
    U.S. crude oil futures        settled 1.4 percent higher at
$69.85 a barrel.    
    Canadian factory sales grew by 0.9 percent in July from June
on higher sales in the transportation equipment industry,
Statistics Canada said. Analysts surveyed by Reuters had
forecast an increase of 0.6 percent.             
    "Canadian factories continued to hum in July," Avery
Shenfeld, chief economist at CIBC Capital Markets, said in an
email. "The data give some upside to our Q3 GDP forecast, and
underscore that the Bank of Canada is positioned to hike in
October as long as NAFTA talks don't blow up."
    Concerned business and political leaders are increasing the
pressure on Canadian Prime Minister Justin Trudeau to agree on a
deal to renew the North American Free Trade Agreement and drop
his insistence that no deal is better than a bad deal.
                
    The Bank of Canada has raised interest rates four times
since July 2017. Money markets see a nearly 80 percent chance of
another hike in October.           
    Canadian government bond prices were lower across a steeper
yield curve, with the 10-year             falling 35 Canadian
cents to yield 2.383 percent, its highest since May 25.
    Canada's inflation report for August and July retail sales
data are due on Friday.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Peter
Cooney)
  
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