January 9, 2018 / 10:37 PM / 10 months ago

CANADA FX DEBT-C$ dips vs firmer greenback; focus on rate decision next week

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2464, or 80.23 U.S. cents
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches a three-year high at 2.205 percent
    * U.S. crude oil futures settle nearly 2 percent higher

    By Fergal Smith
    TORONTO, Jan 9 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as the greenback firmed
broadly and investors turned attention to a Bank of Canada
interest rate decision next week.
    At 5 p.m. EST (2200 GMT), the Canadian dollar          was
trading at C$1.2464 to the greenback, or 80.23 U.S. cents, down
0.4 percent. The currency traded in a range of C$1.2399 to
C$1.2478.
    "The move lower was just broad-based U.S. dollar strength,"
said Blake Jespersen, managing director, foreign exchange sales
at BMO Capital Markets.
    The U.S. dollar        rose to an 11-day high against a
basket of other major currencies, continuing a recovery from
four-month lows plumbed at the start of the year.             
    "I think it (the loonie) is going to be trading in a very
tight range until we get to the bank announcement next
Wednesday," Jespersen said. "That has turned into the main event
in the Canadian market place." 
    The currency touched its strongest in three months at
C$1.2355 on Friday after stronger-than-expected domestic jobs
data prompted investors to bet on a Bank of Canada rate hike as
soon as Jan. 17.                       
    Perceived chances of a rate hike next week have more than
doubled to 83 percent since the jobs data, the overnight index
swaps market indicated. They got a further boost from a Bank of
Canada business survey on Monday that showed optimism.
                    
    The price of oil, one of Canada's major exports, touched its
highest since December 2014, supported by OPEC-led production
cuts and expectations that U.S. crude inventories have dropped
for an eighth week in a row.             
    U.S. crude oil futures        settled nearly 2 percent
higher at $62.96 a barrel.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
           fell 2.5 Canadian cents to yield 1.799 percent and
the 10-year             declined 39 Canadian cents to yield
2.205 percent, its highest since September 2014.
    Canadian housing starts fell in December to a seasonally
adjusted annual rate of 216,980 from November's downwardly
revised 251,675. Economists had expected a decline to a 212,500
annual rate.              

 (Reporting by Fergal Smith; Editing by Andrew Hay and James
Dalgleish)
  
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