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CANADA FX DEBT-Canadian dollar falls but oil rally caps currency's decline

· 02/04/2021 17:32
CANADA FX DEBT-Canadian dollar falls but oil rally caps currency's decline

Adds analyst quotes and details throughout; updates prices

Canadian dollar weakens 0.4% against the greenback

Loonie trades in a range of 1.2777 to 1.2845

Price of U.S. oil settles nearly 1% higher

Canadian bond yields rise across a steeper curve

By Fergal Smith

- The Canadian dollar weakened against its U.S. counterpart on Thursday as the greenback broadly advanced, but the loonie's decline slowed on stronger oil prices and ahead of Canada's monthly jobs report on Friday.

The currency CAD= was trading 0.4% lower at 1.2826 to the greenback, or 77.97 U.S. cents, having traded in a range of 1.2777 to 1.2845.

"Broad USD strength" has weighed on the loonie, said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. "But the Canadian dollar is hanging in there because of oil's rebound this afternoon."

The U.S. dollar .DXY climbed against a basket of major currencies for a fifth straight session on confidence in the U.S. economic outlook and the possibility that Friday's U.S. jobs report for January will be stronger than expected. nL1N2KA2J0

Canada's January employment report is also due on Friday, with economists expecting a second straight month of job declines after some provinces implemented lockdowns to help contain the coronavirus pandemic.

U.S. crude oil futures CLc1 settled nearly 1% higher at$56.23 a barrel after the OPEC+ alliance of producers stuck to its reduced output policy and U.S. crude stocks fell. nL1N2KA06T

Oil is one of Canada's major exports, about 75% of which goes to the United States.

Canada and the United States can collaborate more closely on manufacturing electric vehicles and on supplying critical minerals needed to make batteries for cars and other clean technologies, Prime Minister Justin Trudeau said. nL1N2KA2LK

Canadian government bond yields edged higher across a steeper curve, with the 10-year CA10YT=RR up 1.7 basis points at 0.966%. It touched its highest intraday since March last year at 0.975%.

(Reporting by Fergal Smith; Editing by Kirsten Donovan and Sam Holmes)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))