December 3, 2019 / 9:09 PM / 4 days ago

CANADA FX DEBT-Loonie firms as investors see Bank of Canada on hold

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar rises 0.1% against the greenback
    * Price of U.S. oil increases by 0.5%
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 3 (Reuters) - The Canadian dollar edged higher
against the greenback on Tuesday, as investors' worries about
prospects for a trade deal between the United States and China
were offset by bets that the Bank of Canada would leave interest
rates on hold this week.
    Money markets see almost no chance of an interest rate cut
by the central bank on Wednesday, after Governor Stephen Poloz
said nearly two weeks ago that monetary conditions were about
right given the current economic situation.
                      
    Before Poloz's remarks, chances of a cut were about 25%.    
    "One factor that has supported the Canadian dollar of late
continues to be the chipping away of rate-cut expectations for
the Bank of Canada," said Mark Chandler, head of Canadian fixed
income and currency strategy at RBC Capital Markets. "The
general risk-off tone has not though been very supportive, with
equities taking the beating that they are taking today."
    "It seems to be those two factors that are at play for the
currency and they are balancing themselves out pretty finely
right now," Chandler said.
    Global stock markets          fell after President Donald
Trump said a trade agreement with China might have to wait until
after the U.S. presidential election in November 2020, denting
hopes of a resolution soon to a dispute that has weighed on the
world economy.                 
    At 3:41 p.m. (2041 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3294 to the greenback, or 75.22 U.S.
cents. The currency traded in a range of 1.3283 to 1.3321.
    The price of oil, one of Canada's major exports, rose on
expectations of output cuts from major producers. U.S. crude oil
futures        were up 0.5% at $56.25 a barrel.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries, on a flight to
safety.             
    The two-year            rose 10.5 Canadian cents to yield
1.554% and the 10-year             was up 78 Canadian cents to
yield 1.449%.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)
  
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