September 6, 2019 / 1:28 PM / 13 days ago

CANADA FX DEBT-Loonie posts 1-month high as jobs gain clips rate cut bets

    * Canadian dollar rises 0.3% against the greenback
    * Canada's economy gains 81,100 net jobs in August
    * Loonie touches its strongest since Aug. 5 at 1.3179
    * Canada-U.S. 2-year spread hits narrowest since October
2017

    By Fergal Smith
    TORONTO, Sept 6 (Reuters) - The Canadian dollar strengthened
to a one-month high against its U.S. counterpart on Friday, as
domestic data showing a bigger-than-expected jobs gain in August
reduced investor expectations for a Bank of Canada interest rate
cut next month.
    The Canadian economy gained 81,100 net jobs in August,
largely driven by increases in part-time work, Statistics Canada
data showed. That was much more than the 15,000 increase that
analysts had expected.             
    "If the Bank of Canada was on the fence about cutting rates
in October, today's jobs numbers might be one further push
towards standing pat," Avery Shenfeld, chief economist at CIBC
Capital Markets, said in a note.
    Chances of a cut at the Bank of Canada's next interest rate
decision on Oct. 30 fell to 22% from 28% before the data, the
overnight index swaps market indicated.           
    They were nearly 70% before Wednesday's interest rate
decision, which showed no indication that the central bank was
planning to cut rates despite easing this year by many of its
global peers, including the U.S. Federal Reserve.
    At 9:10 a.m. (1310 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3186 to the greenback, or 75.84 U.S.
cents.
    The currency, which touched its strongest since Aug. 5 at
1.3179, was on track to break a seven-week losing streak. For
the week, it was up 0.9%.
    Gains for the loonie came as the U.S. dollar was pressured
by data showing U.S. employers added fewer workers than expected
in August.             
    The price of oil, one of Canada's major exports, fell as
U.S.-China trade tensions continued to weigh on sentiment
despite recent diplomatic progress. U.S. crude oil futures
       were down nearly 2% at $55.19 a barrel.
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 6.5 Canadian
cents to yield 1.489% and the 10-year             falling 21
Canadian cents to yield 1.287%.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed 4.1 basis points to a spread of -4.7 basis
points, its narrowest gap since October 2017.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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