MARKET NEWS
Canadian dollar pares gains as Fed signals earlier rate hikes - REUTERS
(Adds strategist quotes and details throughout, updates prices)
* Canadian dollar strengthens 0.5% against greenback
* Canadian factory sales likely up 0.5% in August
* Price of U.S. oil settles 2.5% higher
* Canadian bond yields were mixed across the curve
By Fergal Smith
TORONTO, Sept 22 (Reuters) - The Canadian dollar
strengthened to a five-day high against the greenback on
Wednesday as worries about the potential collapse of property
developer China Evergrande receded, but gains were capped by a
hawkish shift in guidance from the Federal Reserve.
Shares globally gained ground as China Evergrande
struck a deal to pay a coupon on one of its domestic bonds.
Worries over a possible default by China's No. 2 property
developer have weighed on financial markets in recent days.
The news out of China "broadly lifted risk sentiment and
risk currencies like the Canadian dollar," said Erik Bregar, an
independent FX analyst.
Canada is a major exporter of commodities, including oil, so
the loonie tends to be sensitive to investor appetite for risk.
Oil prices increased as U.S. crude stocks fell to their
lowest levels in three years on a recovery in refining activity
after recent storms.
U.S. crude futures settled 2.5% higher at $72.23 a
barrel, while the Canadian dollar was up 0.5% at 1.2753 per
greenback, or 78.41 U.S. cents.
It touched its strongest intraday level since last Friday at
1.2698 before paring gains.
The Fed's hawkish message took "some of the optimism out of
stocks and the Canadian dollar," Bregar said.
The U.S. central bank cleared the way to reduce its monthly
bond purchases "soon" and signaled interest rate increases may
follow more quickly than expected.
A preliminary estimate showed that Canadian factory sales
rose 0.5% in August, driven by higher sales of petroleum and
coal products, chemical and primary metal industries.
Canadian retail sales data for July is due on Thursday,
which could help guide expectations for the Bank of Canada
policy outlook.
Canadian government bond yields were mixed across the curve,
with the 10-year little changed at 1.231%.
(Reporting by Fergal Smith; Editing by Paul Simao and Peter
Cooney)