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Loonie rebounds from eight-day low as trade deal hopes rise

By Fergal Smith
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday, recovering from an earlier eight-day low as domestic jobs data loomed and Beijing signaled a trade deal with the United States was close to being sealed.

At 4:31 p.m. (2131 GMT), the Canadian dollar <CAD=D4> was trading 0.1% higher at 1.3174 to the greenback, or 75.91 U.S. cents. The currency touched its weakest intraday level since Oct. 30, the day of a Bank of Canada interest rate announcement, at 1.3197.

The Bank of Canada has diverged this year from some other central banks, such as the Federal Reserve, that have eased interest rates. It has left its benchmark interest rate on hold at 1.75% as inflation stayed close to its 2% target and Canada's economy added jobs at a robust pace.

Canada's employment report for October is due on Friday.

"I think the job number tomorrow if it does come outside the range of expectations will move it (the Canadian dollar) quite a bit," said Hosen Marjaee, a senior portfolio manager at Manulife Asset Management. "I think it will have an impact on the Bank of Canada decision on what to do next."

The Canadian dollar will edge higher over the coming 12 months, supported by the solid performance of Canada's economy and its high yield relative to other major currencies, a Reuters poll showed.

Global shares rose and bond yields climbed after China said it had agreed with the United States to remove tariffs in phases, while state-owned Xinhua News Agency said Beijing was also considering removing restrictions on poultry imports.

Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade.

U.S. crude oil futures <CLc1> settled 1.4% higher at $57.15 a barrel as hopes rose for an end to the trade dispute that has weighed on economic growth and fuel demand.

Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year <CA2YT=RR> fell 5.5 Canadian cents to yield 1.625% and the 10-year <CA10YT=RR> was down 67 Canadian cents to yield 1.613%.

The inversion of Canada's yield curve, a traditional harbinger of recession, receded. The gap between the 2- and 10-year yields narrowed by 4.3 basis points to a spread of 1.2 basis points in favor of the shorter-dated bond, which was the smallest gap since July 29.


(Reporting by Fergal Smith; Editing by Andrea Ricci and Peter Cooney)