May 2, 2018 / 1:28 PM / 23 days ago

CANADA FX DEBT-C$ pulls back from 9-day high ahead of Fed decision

    * Canadian dollar at C$1.2843, or 77.86 U.S. cents
    * Loonie touches its strongest since April 23 at C$1.2803
    * Bond prices lower across the yield curve
    * 10-year yield touches 2-1/2-month high at 2.387 percent

    TORONTO, May 2 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Wednesday, pulling back
from an earlier nine-day high as investors turned attention to
the U.S. Federal Reserve interest rate decision.
    At 9:13 a.m. EDT (1313 GMT), the Canadian dollar         
was trading near flat at C$1.2843 to the greenback, or 77.86
U.S. cents.
    The currency's weakest level of the session was C$1.2857,
while it touched its strongest since April 23 at C$1.2803.
    The loonie got a boost on Tuesday from data showing the
economy expanded by a stronger-than-expected 0.4 percent in
February and by remarks from Bank of Canada Governor Stephen
Poloz.
    Poloz said there is good reason to believe the central bank
can manage the risks of Canada's high household debt, even as he
signaled that interest rate hikes will continue, increasing the
cost of that debt.             
    In addition to high household debt, the Bank of Canada has
worried about an uncertain outlook for trade.
     U.S. Trade Representative Robert Lighthizer said on Tuesday
that if a deal to revise the North American Free Trade Agreement
cannot be reached with Canada and Mexico in about three weeks,
its approval by the U.S. Congress could be in jeopardy.
            
    The Fed is set to hold rates steady on Wednesday but will
likely further encourage expectations that it will lift
borrowing costs in June on the back of rising inflation and low
unemployment.             
    The price of oil, one of Canada's major exports, surrendered
early gains after evidence of further increases in U.S. shale
supply and a rise in Iranian exports ahead of a possible renewal
of U.S. sanctions on Tehran.             
    U.S. crude        prices were down 0.2 percent at $67.13 a
barrel.   
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 2.5 Canadian cents to
yield 1.943 percent and the 10-year             falling 21
Canadian cents to yield 2.365 percent.
    The 10-year yield touched its highest intraday since Feb. 15
at 2.387 percent.
    Canada's trade data for March is due on Thursday.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
  
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