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The Globe and Mail

Canadian dollar dips as investors weigh bullish bets data

A loonie is pictured in North Vancouver, on March 5, 2014.

Globe and Mail Update

The Canadian dollar slipped on Monday against its U.S. counterpart, lagging the performance of many other major currencies as investors weighed data showing an increase in bullish bets on the currency.

At 4 p.m. EST (2100 GMT), the Canadian dollar was trading 0.2 per cent lower at $1.2601 to the greenback, or 79.36 U.S. cents.

The currency traded in a range of $1.2556 to $1.2623. On Friday, it touched a six-week low at $1.2690 after domestic data showed the biggest decline in jobs since January 2009.

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Also on Friday, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed that speculators raised bullish bets on the Canadian dollar for the fifth straight week. As of Feb. 6, net long positions had risen to 40,164 contracts from 33,465 a week earlier.

"One would have thought that with a market that was long CAD, that maybe that (positioning) would have been trimmed," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. "Maybe coming into trading today that had the market spooked and it decided to sell CAD against everything."

Investors that have made bullish bets on a currency could be vulnerable to losses if other investors that are long choose to cut or exit their positions.

The U.S. dollar fell against a basket of major currencies, including the euro, as U.S. stocks recouped some losses from the dramatic sell-off that saw the S&P 500's sharpest decline in more than two years.

Commodity-linked currencies, such as the Canadian dollar tend to underperform when stocks fall. The loonie retreated 1.2 per cent last week.

The price of oil, one of Canada's major exports, recovered some of last week's steep losses. U.S. crude prices settled 0.2 per cent higher at $59.29 a barrel.

Canadian government bond prices were higher across the yield curve, with the two-year up 1 cent to yield 1.783 per cent and the benchmark 10-year rising 11 cents to yield 2.338 per cent.

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The gap between Canada's 10-year yield and its U.S. equivalent widened by 3.7 basis points to a spread of –51.6 basis points, its widest since Dec. 19.

The Canadian Real Estate Association will release its monthly home sales report on Thursday. Canada's manufacturing sales report for December is due on Friday.

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