The Canadian dollar ended near unchanged against the greenback on Friday, as cautious market participants balanced a sharp jump in crude oil prices against comments by US Federal Reserve officials who did not rule out a September rate hike. The Canadian dollar ended the North American session trading at C$1.3215 per US dollar, or 75.67 US cents, barely weaker than the Bank of Canada's official Thursday close of C$1.3218, or 75.65 US cents.
"There's a tug of war between what's going on in the oil market ... and implications for the Federal Reserve's coming meeting," said Mazen Issa, a senior foreign exchange strategist at Toronto-Dominion Bank based in New York. US crude rose 6.3 percent, notching its first weekly gain in two months, after a rally in gasoline amid refinery outages and concerns about strife in Yemen fed a second frenzied day of short-covering in oil.
The US currency gained against a basket of currencies after one Fed official said the central bank cannot wait for the case for hiking to be overwhelming and another put the odds of a September move higher at roughly even. The Canadian currency slipped 0.3 percent over the week, a tumultuous time when gyrations in China were felt across asset classes and geographies.
TD's Issa said a data-heavy calendar would likely weigh on the Canadian currency in coming weeks, even though the current oil price and interest rate spreads suggest it has already been punished. "The data should be leaning negatively so on balance it would tilt toward a weaker Canadian dollar," he said. At one point, the currency touched $1.33, but did not break through, while its strongest level was C$1.3167. Canadian producer prices unexpectedly rose 0.7 percent in July, the third consecutive monthly gain, on higher prices for motorized vehicles and aircraft, Statistics Canada data showed. Canadian government bond prices were mixed across the maturity curve. The two-year price fell 2.5 Canadian cents to yield 0.416 percent, and the benchmark 10-year rose 21 Canadian cents to yield 1.442 percent. The Canada-US two-year bond spread was -30.6 basis points, while the 10-year spread was -74.2 basis points.
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