June 10, 2019 / 1:41 PM / 2 months ago

CANADA FX DEBT-C$ retreats from 3-month high as greenback rallies

    * Canadian housing starts fall 13.3% in May 
    * U.S. crude oil futures        trade near flat at $54.01 a
barrel
    * Canadian bond prices decline across the yield curve
    * Canada-U.S. 2-year spread hits narrowest since March 2018

    TORONTO, June 10 (Reuters) - The Canadian dollar was little
changed against its broadly stronger U.S. counterpart on Monday,
pulling back from an earlier three-month high which was reached
after the United States and Mexico announced a deal on
immigration.    
    U.S. President Donald Trump hinted more details were to come
about a migration pact the United States signed with Mexico last
week, saying another portion of the deal with Mexico would need
to be ratified by Mexican lawmakers.             
    Investors worry that potential U.S. tariffs on Mexican goods
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.
    At 9:17 a.m. (1317 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3266 to the greenback, or 75.38
U.S. cents. The currency, which climbed 1.9% last week, touched
its strongest level since March 1 at 1.3226.
    The three-month high for the loonie came after data on
Friday showed a record low unemployment rate, which supported
the Bank of Canada's view that the economy will pick up.
            
    Canadian housing starts fell 13.3% in May compared with the
previous month as groundbreaking tumbled on multiple unit urban
homes, data from the national housing agency showed on Monday.
                
    U.S. crude oil futures        were nearly unchanged at
$54.01 a barrel as major producers weighed extending an
output-cutting deal. Oil is one of Canada's major exports.
            
    Meanwhile, the U.S. dollar        rose against a basket of
major currencies after sources said European Central Bank
policymakers were open to cutting the ECB's policy rate should
economic growth worsen, pressuring the euro.
    Speculators have raised their bearish bets on the Canadian
dollar for the first time in three weeks, data from the U.S.
Commodity Futures Trading Commission and Reuters calculations
showed on Friday. As of June 4, net short positions had
increased to 41,759 contracts from 39,423 in the prior week.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 9 Canadian cents to
yield 1.453% and the 10-year             falling 45 Canadian
cents to yield 1.508%.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 1.8 basis points to a spread of 42.6
basis points in favor of the U.S. bond, its narrowest gap since
March 2018.   

 (Reporting by Fergal Smith
Editing by Susan Thomas)
  
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