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CANADA FX DEBT-C$ outperforms despite oil slump as Yellen speech in focus

Published 2017-08-24, 04:49 p/m
© Reuters.  CANADA FX DEBT-C$ outperforms despite oil slump as Yellen speech in focus
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* Canadian dollar at C$1.2530 or 79.81 U.S. cents

* Bond prices lower across the maturity curve

By Solarina Ho

TORONTO, Aug 24 (Reuters) - The Canadian dollar clung to gains against the U.S. dollar on Thursday, outperforming key currency rivals even as oil prices fell and the greenback inched higher ahead of a meeting of global central bankers.

With little domestic news to steer direction until next week's quarterly gross domestic product report, investors are focused on the bankers' summit in Jackson Hole, Wyoming.

Speeches by Federal Reserve Chair Janet Yellen and European Central Bank chief Mario Draghi will be parsed for clues on monetary policy direction, even as significant new policy signals were seen as unlikely.

"The bar's been set fairly high there in terms of (Yellen) coming out and reaffirming that they have a policy to push ahead on raising interest rates," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.

"If she ends up disappointing that expectation there is a chance the (Canadian) currency could get a little bit stronger."

At 4:00 p.m. ET (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2530 to the greenback, or 79.81 U.S. cents, up 0.2 percent.

It was also stronger against most major currencies, including the euro CADEUR=R , the Australian CADAUD=R and New Zealand dollars CADNZD=R and the British pound CADGBP=R .

The loonie, which traded between C$1.2519 and C$1.2561 during the session, has rallied nearly 7 percent this year, helped by a broadly weaker U.S. dollar and upbeat domestic economic data that prompted the Bank of Canada to raise interest rates for the first time in seven years last month. The central bank is expected to raise rates again this fall.

The currency's strength came even as the price of oil LCOc1 , a key Canadian export, settled down about 2 percent on demand concerns. U.S. Gulf Coast refineries shut operations as Hurricane Harvey was forecast to turn into a major hurricane. O/R

"The Canadian dollar and oil relationship has been looser than in the past - the correlation's been slipping," said Chandler.

Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR price down 1 Canadian cent to yield 1.266 percent and the benchmark 10-year CA10YT=RR falling 4 Canadian cents to yield 1.886 percent.

The Canada-U.S. two-year bond spread stood at -6.5 basis points, while the 10-year spread stood at -30.9 basis points.

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