- Canadian dollar at C$1.3483, or 74.17 U.S. cents
- Loonie touches two-week low at C$1.3547
- CFTC data shows bearish bets on loonie held near record high
- 10-year yield touches 6-month low at 1.382 percent
The heavily shorted Canadian dollar edged higher on Friday against its broadly weaker U.S. counterpart, recovering from an earlier two-week low as data showing a rise in Canada’s exports offset the impact of lower oil prices.
Canadian exports climbed to a record high in April and first-quarter labor productivity approached a three-year high, further evidence the economy is recovering after a long slump caused by low oil prices.
The export strength coupled with improved investment in the first quarter would be seen as an encouraging sign by the Bank of Canada, said Paul Ferley, assistant chief economist at Royal Bank of Canada.
Prices of oil, one of Canada’s major exports, fell to a three-week low on worries that President Donald Trump’s withdrawal from the Paris climate accord could accelerate U.S. oil production.
U.S. crude prices settled 70 cents lower at $47.66 a barrel.
At 5 p.m. EDT (2100 GMT), the Canadian dollar was trading at C$1.3483 to the greenback, or 74.17 U.S. cents, up 0.2 percent.
The currency’s strongest level of the session was C$1.3482 and its weakest was C$1.3547, a level not seen since May 19.
For the week, the loonie fell 0.4 percent. It is expected to dip in the short term but stabilize in 12 months, a Reuters poll has showed, as a strengthening domestic economy encourages the Bank of Canada to prepare the market for interest rate hikes.
Net short positions on the Canadian dollar were trimmed to 98,187 contracts as of May 30 from 99,109 a week earlier, but held near a record high, data from the Commodity Futures Trading Commission and Reuters calculations showed.
Elevated bearish bets on the loonie leave the market vulnerable to a quick move higher for the currency, said Simon Côté, managing director, risk management solutions, National Bank Financial.The U.S. dollar fell against a basket of major currencies on Friday after weaker-than-expected U.S. employment data suggested cautious Federal Reserve policy beyond June.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries.
The two-year rose 1.5 Canadian cents to yield 0.689 percent and the 10-yea climbed 23 Canadian cents to yield 1.401 percent.
The 10-year yield touched its lowest intraday level since Nov. 10 at 1.382 percent. But the gap between it and the U.S. 10-year yield narrowed by 3.6 basis points to a spread of -75.5 basis points as Treasuries outperformed.
(Reporting by Fergal Smith; Editing by Paul Simao and James Dalgleish)