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CANADA FX DEBT-Canadian dollar continues winning streak, supported by yield spread

By on April 23, 2021 0
 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar strengthens 0.2% against the greenback
    * Estimate shows Canadian factory sales up 3.5% in March
    * Price of U.S. oil settles 1.2% higher
    * Canada's 10-year yield rises nearly one basis point to

    By Fergal Smith
    TORONTO, April 23 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Friday, notching
its fourth straight week of gains as the greenback broadly fell
and after the Bank of Canada's hawkish shift supported the
currency's yield advantage.
    The Canadian dollar        was trading 0.2% higher at 1.2475
to the greenback, or 80.16 U.S. cents. It was also up 0.2% for
the week, adding to slender gains in the prior three weeks.   
    On Wednesday, the loonie touched its strongest level in one
month at 1.2455 after the BoC signaled it could start hiking
interest rates next year and cut the pace of bond purchases.
    "With the Bank of Canada primed to become the first G-10
central bank to bolt out of the monetary tightening starting
gate, interest rate differentials are keeping the loonie
well-supported," said Karl Schamotta, chief market strategist at
Cambridge Global Payments.
    At 16.5 basis points in favor of Canada's bond, the gap
between Canada's 2-year yield and its U.S. equivalent was
trading at nearly its widest since April last year.
    "With strong commodity prices, an accelerating vaccine
rollout and powerful fiscal stimulus helping to raise near-term
growth expectations, the currency appears poised for an
overshoot to the upside," Schamotta said.
    Canadian Prime Minister Justin Trudeau received his first
dose of AstraZeneca's COVID-19 vaccine on Friday.             
    On Monday, Trudeau's government forecast a budget deficit of
C$154.7 billion in the fiscal year ending next March, as Ottawa
spends heavily to counter a third wave of infections.
    Canadian factory sales rose 3.5% in March from February,
Statistics Canada said in a flash estimate, adding to evidence
of economic recovery.             
    The U.S. dollar        fell against a basket of currencies,
while the price of oil, one of Canada's major exports, settled
1.2% higher at $62.14 a barrel.                         
    Canada's 10-year yield             was up nearly one basis
point at 1.523%.

 (Reporting by Fergal Smith; Editing by Kirsten Donovan and
Jonathan Oatis)