December 3, 2018 / 10:01 PM / 14 days ago

CANADA FX DEBT-C$ rallies to two-week high on U.S.-China trade truce

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar notches largest gain in 2 months
    * Loonie touches strongest level since Nov. 20
    * U.S. oil price jumps nearly 4 percent
    * Canadian bond prices rise across flatter yield curve

    By Fergal Smith
    TORONTO, Dec 3 (Reuters) - The Canadian dollar strengthened
to its highest in nearly two weeks against its U.S. counterpart
on Monday after the United States and China agreed to a 90-day
truce in their trade war, boosting the outlook for the global
economy.
    Canada exports many commodities, including oil, and runs a
current account deficit, so its economy could benefit if
prospects for global trade improve.
    "The outlook for global growth in 2019 and beyond depends on
how well the U.S. and China are getting along and this was a
positive outcome," said Adam Button, chief currency analyst at
ForexLive. "The Canadian dollar is a reflection of the tentative
optimism." 
    Stocks and the price of oil climbed after U.S. President
Donald Trump and Chinese President Xi Jinping agreed to hold off
on new tariffs during talks in Argentina on Saturday, and ahead
of a meeting this week of the Organization of the Petroleum
Exporting Countries that is expected to cut supply.
                        
    U.S. crude        prices settled nearly 4 percent higher at
$52.95 a barrel, while the discount on Western Canada Select was
slashed, after Alberta Premier Rachel Notley said on Sunday the
government would force producers to cut output by 8.7 percent
until excess crude in storage is reduced.             
    "The news of a (Canadian) production cut was dramatic and
mostly unexpected," Button said. "A significant amount of
pressure has been relieved from small and medium sized Canadian
oil companies."
    At 4:46 p.m. (2146 GMT), the Canadian dollar          was
trading 0.6 percent higher at 1.3199 to the greenback, or 75.76
U.S. cents, its biggest gain since Oct. 1. The currency touched
its strongest level since Nov. 20 at 1.3160.
    Gains for the loonie came ahead of a Bank of Canada policy
decision on Wednesday. A strong majority of economists polled by
Reuters said the central bank will wait until early next year
before it raises interest rates again and that two more rate
rises will follow by end-2019.                 
     Canada's manufacturing sector expanded in November at the
fastest pace in three months, boosted by a pickup in new orders
and the strongest job creation in at least eight years, data
showed on Monday.             
    Canada's trade report for October is due on Thursday and the
November employment report is due on Friday.
    Canadian government bond prices were higher across a flatter
yield curve. The 10-year             yield touched its lowest
intraday level since Sept. 6 at 2.234 percent.

 (Reporting by Fergal Smith; Editing by David Gregorio)
  
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