September 10, 2019 / 8:31 PM / 3 months ago

CANADA FX DEBT-C$ posts 6-week high, buoyed by Bank of Canada's steady rate stance

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar posts a near six-week high at 1.3134
    * Canadian housing starts increase 1.9% in August
    * The price of U.S. oil declines 0.8%
    * Canada's 10-year yield touches a near six-week high at
1.435%

    By Fergal Smith
    TORONTO, Sept 10 (Reuters) - The Canadian dollar
strengthened to a near six-week high against the U.S. dollar on
Tuesday, supported by improvement in risk appetite and a less
dovish Bank of Canada policy announcement last week than some
investors had expected.
    The Bank of Canada held interest rates steady last Wednesday
and made no mention of future cuts despite easing this year by
some of its global peers, including the U.S. Federal Reserve.
            
    Chances of a rate cut at the central bank's next meeting on
Oct. 30 have slumped to about 15% from nearly 70% before last
week's rate decision, money market data showed.           
    We are seeing "position unwinding, given that people were
looking for a dovish Bank of Canada meeting," said Mark
McCormick, North American head of FX strategy at TD Securities.
"The other thing is that we are getting more momentum because
risk appetite is improving as well."
    The S&P 500 fell on Tuesday but has rallied as much as 5.9%
since August. Canada's bond yields are higher than many major
issuers of sovereign debt, so its currency tends to benefit from
a pick-up in the flow of global capital.
    At 3:57 p.m. (1957 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3151 to the greenback, or 76.04 U.S.
cents. The currency touched its strongest intraday level since
July 31 at 1.3134.
    Gains for the loonie coincided with data from the national
housing agency showing that Canadian housing starts unexpectedly
rose in August, climbing 1.9% from July. Separate data from
Statistics Canada showed that the value of Canadian building
permits increased by 3.0% in July from June.
                        
    "The construction side of the Canadian housing market still
looks rock solid," Robert Kavcic, a senior economist at BMO
Capital Markets, said in a note.    
    Meanwhile, the price of oil, one of Canada's major exports,
was put under pressure by U.S. President Donald Trump's firing
of national security adviser John Bolton, which raised
speculation of a return of Iranian crude exports to the market.
U.S. crude oil futures settled 0.8% lower at $57.40 a barrel.
                
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries and German Bunds. The
10-year yield touched its highest intraday level since Aug. 1 at
1.435%.
    Canadian Prime Minister Justin Trudeau will formally launch
the campaign for an Oct. 21 national election on Wednesday,
sources from his Liberal party said.             

 (Reporting by Fergal Smith; editing by Grant McCool)
  
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