Canada dollar edges higher on strong oil, bonds up
The Canadian dollar edged
higher versus the U.S. currency on Friday, helped by stronger
oil and gold prices, while bonds rose alongside U.S.
treasuries.
At 9:30 a.m. (1330 GMT), the currency was at C$1.1573 to
the U.S. dollar, or 86.41 U.S. cents, up from C$1.1582 to the
U.S. dollar, or 86.34 U.S. cents, at Thursday’s close.
The currency eased on Thursday as it consolidated its
data-driven gains from earlier in the week, but traders
returned to the currency on Friday, helped by its commodity
profile.
Oil prices, which have risen sharply this week, charged
above $62 per barrel on news Iran was holding British Navy
personnel after a boarding operation in Iraqi waters. Gold
prices were also stronger.
”There seemed to be a lot more European interest in the
overnight session. A lot of people seemed to be talking up the
fact that oil prices have rallied substantially over the last
couple of days,” said George Davis, chief currency strategist
at RBC Capital Markets.
The Canadian dollar’s gains this week — including a
3-month high on Wednesday — have been due to much stronger
than expected domestic consumer inflation data coupled with
speculation that the U.S. Federal Reserve may cut rates later
this year.
The currency is now up about 2.6 percent from 15-month lows
hit in early February.
Davis said the currency is in a good position for further
gains, but that it could run into trouble if the U.S. economy
slows substantially, which would hurt demand for Canadian
products and pressure commodity prices.
BONDS HIGHER
Bond prices rose modestly alongside U.S. treasuries as the
market tried to get a sense of the rate outlook in both Canada
and the United States.
The U.S. Federal Reserve said on Wednesday it was removing
its tightening bias, prompting some to speculate about rate
cuts, but those expectations subsided on Thursday.
The Bank of Canada is seen by economists to be leaving
rates unchanged until late in the year, but predictions are
mixed as to whether the next move will be a rate hike or a rate
cut.
The Bank of Canada’s overnight rate is 4.25 percent, while
the comparable U.S. fed funds rate is 5.25 percent.
The two-year bond inched ahead 3 Canadian cents to C$99.58
to yield 3.945 percent, while the 10-year bond climbed 16
Canadian cents to C$99.31 to yield 4.090 percent.
The yield spread between the two-year and 10-year bond
moved to 13.5 basis points, from 14.8 at the previous close.
The 30-year bond gained 25 Canadian cents to C$124.60 to
yield 4.193 percent. In the United States, the 30-year treasury
yielded 4.168 percent.
The three-month when-issued T-bill yielded 4.18 percent,
unchanged from the previous close.