April 24, 2019 / 8:46 PM / in a month

CANADA FX DEBT-C$ slides to 4-month low on more dovish Bank of Canada

 (Adds strategist quotes and details, updates prices)
    * Canadian dollar falls 0.5% against the greenback
    * Loonie touches its weakest since Jan. 3 at 1.3522
    * Price of U.S. oil decreases 0.6%
    * Canada-U.S. 10-year spread posts widest in nearly one
month

    By Fergal Smith
    TORONTO, April 24 (Reuters) - The Canadian dollar fell to a
nearly four-month low against its broadly stronger U.S.
counterpart on Wednesday, as investors raised bets on a Bank of
Canada interest rate cut this year after the central bank
slashed its economic growth outlook.
    Canada's central bank held its benchmark interest rate
steady at 1.75% as expected but removed wording about the need
for future rate hikes and lowered its growth forecast for 2019
to 1.2% from 1.7%.                 
    "It is pretty clear that the Bank of Canada softened its
stance again," said Marc Chandler, chief market strategist at
Bannockburn Global Forex LLC.
    The Bank of Canada has raised rates by 125 basis points
since July 2017. But the Canadian economy has taken a hit from
the province of Alberta's mandatory production cut of oil - the
country's biggest export - a slowdown in the housing market and
wilting business sentiment over worries surrounding the
U.S.-China trade war.
    Chances of an interest rate cut by December rose to 65% from
57% before the policy announcement, data from the overnight
index swaps market showed.           
    At 4:03 p.m. (2003 GMT), the Canadian dollar          was
trading 0.5% lower at 1.3484 to the greenback, or 74.16 U.S.
cents. The currency touched its weakest intraday level since
Jan. 3 at 1.3522.
    The decline for the loonie came as disappointing German data
helped push the U.S. dollar        to a nearly two-year high
against a basket of major currencies.             
    "It (the Canadian dollar) was already pushing an open door
today. The market was clearly leaning toward the sell side and I
think that it took this as simply an excuse to press," Chandler
said.    
    The price of oil pulled back from a six-month high as data
showing rising U.S. stocks countered fears of tight supply
resulting from OPEC output cuts and U.S. sanctions on Venezuela
and Iran.             
    U.S. crude oil futures        settled 0.6% lower at $65.89 a
barrel.
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 11.5 Canadian cents to
yield 1.511% and the 10-year             rising 72 Canadian
cents to yield 1.674%.
    The 10-year yield fell 2.8 basis points further below the
yield on the equivalent U.S. bond to a spread of -84.8 basis
points, its widest since March 25.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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