C$ rises with oil as investors weigh UK political risk

(Adds strategist quotes and details on activity; updates
prices)
* Canadian dollar rises 0.1 percent against the greenback
* Price of U.S. oil rallies 3.2 percent
* Canadian home sales fall 2.5 percent in December
* Canadian bond prices dip across the yield curve

By Fergal Smith
TORONTO, Jan 15 (Reuters) - The Canadian dollar edged higher
against its broadly stronger U.S. counterpart on Tuesday as oil
prices rebounded, while political upheaval in the UK dominated
trading in the foreign exchange market.
British lawmakers defeated Prime Minister Theresa May's
Brexit divorce deal by a crushing margin, raising the prospect
of a disorderly exit from the European Union or even to a
reversal of the 2016 decision to leave.
"This is potentially the most clear and present shock in the
FX system right now," said Bipan Rai, executive director and
North America head, FX Strategy at CIBC Capital Markets. "If
it's risk-off, the loonie will get hit."
Canada exports many commodities, including oil, so its
economy could be hurt if political uncertainty reduces prospects
for global growth.
U.S. crude oil futures settled up 3.2 percent at
$52.11 a barrel, supported by China's plan to introduce policies
to stabilize a slowing economy.
At 3:17 p.m. (2017 GMT), the Canadian dollar was
trading 0.1 percent higher at 1.3272 to the greenback, or 75.35
U.S. cents. The currency, which on Monday touched its weakest
level in nearly one week at 1.3297, traded in a range of 1.3227
to 1.3293.
The U.S. dollar rose against a basket of major
currencies after data showing Germany's economy slowed in 2018
weighed on the euro.
Resales of Canadian homes fell 2.5 percent in December from
the previous month, extending a string of monthly declines since
September, the Canadian Real Estate Association said.

The Bank of Canada, which has hiked interest rates five
times since July 2017, said last week that soft housing activity
would weigh on the domestic economy as it left interest rates on
hold.
Canadian inflation data for December is due on Friday, which
could help guide market expectations for additional rate hikes
from the central bank.
Canadian government bond prices edged lower across the yield
curve, with the two-year down 2 Canadian cents to
yield 1.896 percent and the 10-year falling 1
Canadian cent to yield 1.965 percent.
The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 1.4 basis points to a spread of 63.5
basis points in favor of the U.S. bond.

(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)


First Published: 2019-01-15 16:42:55
Updated 2019-01-15 22:51:45


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