Canada dollar grinds higher with oil, bonds fall
By Lynne Olver
TORONTO -- The Canadian dollar closed slightly higher higher versus the U.S. dollar Wednesday,pulled up by oil prices and technical factors in the absence of any major economic data releases.
Canadian bond prices were slightly lower, in contrast to
the mixed U.S. treasuries market, where near-dated bonds rose.
The Canadian currency ended at C$1.1790 to the U.S. dollar,
or 84.82 U.S. cents, up from C$1.1801 to the U.S. dollar, or
84.74 U.S. cents, at Tuesday's close.
The Canadian unit strengthened in morning trade to C$1.1780
to the U.S. dollar, gave back some of those gains in the
afternoon, then firmed again.
Ted Gould, a trader at Investors Bank & Trust in Boston,
noted that the C$1.1800 level was becoming an increasingly
important resistance point, possibly constraining any U.S.
dollar move higher.
"We either need to clear this hurdle (C$1.1800) or there
will be a fairly decent retracement coming up in the near
term," Gould predicted.
Oil futures prices in New York rallied in a late-session
rebound, closing at $55.37 a barrel, up 33 cents. The gain
helped the Canadian currency, which often moves in line with
energy prices due to Canada's oil and natural gas exports.
"Stronger crude oil definitely is a solid contributor to
Canadian-dollar strength," Gould said.
Other strategists said that if oil slides back toward the
$52-$53 a barrel mark, then the Canadian dollar is expected to
come under renewed pressure.
The Canadian currency has rebounded from a 14-month low of
C$1.1852 to the U.S. dollar, or 84.37 U.S. cents, hit early
Tuesday, thanks to a pickup in oil and metals prices.
On Thursday, Bank of Canada Governor David Dodge will give
a speech on monetary policy to both the Canadian Netherlands
Business and Professionals Association and the European Union
Chamber of Commerce.
With few top-tier economic releases in Canada until next
week, U.S. data could emerge as the key driver for the North
American currency pair in the coming sessions, Gould said.
BONDS DECLINE SLIGHTLY
Canadian bond prices dipped slightly, while U.S. treasuries
rose at the front end of the yield curve, helped by a two-year
treasury auction that was described as "solid".
In the domestic market, there was talk that some players
were favoring Australian bonds over Canadian bonds due to a
surprisingly soft inflation reading in Australia, HSBC Canada
strategist Stewart Hall said.
"Apparently some people were taking off Canada versus
Australia on the better (inflation) picture, and that perhaps
put some pressure on Canadian bond prices," Hall said.
The Bank of Canada's C$2.3 billion auction of 10-year
government bonds was not seen as weighing on the domestic
market.
The two-year bond was off 3 Canadian cents at C$100.42 to
yield 4.081 percent, while the 10-year bond fell 5 Canadian
cents to C$98.68 to yield 4.172 percent.
The yield spread between the two-year and 10-year bond
moved to 9.1 basis points from 7.7 at the previous close.
The 30-year bond was down 17 Canadian cents at C$124.18 to
yield 4.220 percent. In the United States, the 30-year treasury
yielded 4.910 percent.
The three-month when-issued T-bill yielded 4.17 percent,
unchanged from the previous close.
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