February 2, 2018 / 10:07 PM / 3 months ago

CANADA FX DEBT-C$ suffers biggest drop in one year as stocks slump

 (Adds analyst quotes, details throughout; updates prices)
    * Canadian dollar at C$1.2426, or 80.48 U.S. cents
    * 1.3 percent drop for the currency is deepest since January
2017
    * Loonie touches its weakest since Jan. 23, at C$1.2438
    * 10-year yield reaches highest intraday since May 2014

    By Fergal Smith
    TORONTO, Feb 2 (Reuters) - The Canadian dollar suffered it
sharpest drop in one year against its U.S. counterpart on Friday
after a pickup in U.S. wage growth boosted the greenback, while
multi-year highs for bond yields pressured global stock markets.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading 1.3 percent lower at C$1.2426 to the greenback, or 80.48
U.S. cents, its biggest drop since January 2017.    
    "The Canadian dollar is getting hit from all sides today,"
said Adam Button, currency analyst at ForexLive in Montreal.
"Equities are tumbling, commodities are softer and the U.S.
dollar is jumping due to an outstanding employment report."
    U.S. job growth surged in January and wages posted their
largest annual gain in more than 8-1/2 years.             
    The data helped push the U.S. dollar        higher against a
basket of major currencies as expectations rose that the Federal
Reserve will raise interest rates three times this year. 
            
    All three major U.S. stock indexes tumbled, pressured by
prospects of higher inflation and climbing bond yields.
    "The Canadian dollar needs a strong global economy to
flourish and stocks are having second thoughts," Button said.
    The currency's strongest level of the session was C$1.2256,
while it touched its weakest since Jan. 23 at C$1.2438. For the
week, the loonie fell 0.9 percent. 
    U.S. crude oil futures        settled 0.5 percent lower at
$65.45 a barrel. Oil is one of Canada's major exports.
    Speculators raised bullish bets on the Canadian dollar for
the fourth straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. As of
Tuesday, net long positions had risen to 33,465 contracts from
22,557 a week earlier.
    On Wednesday, the loonie touched its strongest level in four
months at C$1.2250.
    Canadian job growth in 2017 was revised slightly higher,
data from Statistics Canada showed, confirming a stellar year
for the country's labor market.                        
    Canadian government bond prices were mixed across the yield
curve. The 10-year             rose 3 Canadian cents to yield
2.361 percent. Its yield touched its highest intraday level
since May 2014 at 2.392 percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 7.4 basis points to a spread of -48.3
basis points, its widest since Dec. 20.

 (Reporting by Fergal Smith; Editing by Sandra Maler)
  
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