Canadian dollar gains as yield advantage hits 7-year high - REUTERS
OCTOBER 13, 2021
(Adds strategist quotes and details throughout; updates prices)
* Canadian dollar strengthens 0.2% against the greenback
* Touches its strongest level since July 30 at 1.2434
* Price of U.S. oil settles 0.2% higher
* Canadian 2-year yield climbs to highest since March 2020
By Fergal Smith
TORONTO, Oct 12 (Reuters) - The Canadian dollar on Tuesday
strengthened to its highest level in more than two months
against its U.S. counterpart, supported by elevated oil prices
and a wider gap between Canadian and U.S. bond yields.
The loonie was trading 0.2% higher at 1.2462 to the
greenback, or 80.24 U.S. cents, after touching its strongest
level since July 30 at 1.2434.
"There is a lot to suggest that the CAD ought to be trading
a lot higher than it is and we think the CAD might be able to
grind out a bit more in terms of gains in the next few weeks,"
said Shaun Osborne, chief FX strategist at Scotiabank.
The gap between Canadian and U.S. 2-year yields rose by 3.4
basis points to a spread of nearly 41 basis points in favor of
the Canadian bond, its widest since January 2015 when the
Canadian dollar was as strong as 1.16.
A higher yield-spread tends to increase the attractiveness
of a currency. It comes after data on Friday showed that
Canada's economy has added back all the jobs it lost during the
pandemic, bolstering expectations for the Bank of Canada to
further cut its bond purchase program later this month.
The central bank is due on Oct. 27 to make an interest rate
announcement and update its economic forecasts.
The price of oil , one of Canada's major exports,
settled 0.2% higher at $80.64 a barrel after touching on Monday
a seven-year high at $82.18.
Canadian government bond yields were higher across much of a
flatter curve as trading resumed following Monday's Thanksgiving
The 2-year yield climbed 6.2 basis points to 0.752%, its
highest level since March 2020, while the 10-year was up about
half a basis point at 1.634%.
(Reporting by Fergal Smith; editing by Jonathan Oatis and