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Fergal Smith

CANADA FX DEBT-C$ sticks near 3-month high as stimulus measures weigh on greenback

Jun 04 2020

(Adds strategist quote and details throughout; updates prices) * Canadian dollar weakens 0.1% against the greenback * Canada posts a trade deficit of C$3.25 billion in April * Price of U.S. oil increases 0.3% * Canada's 10-year yield rises 5.8 basis points to 0.675% By Fergal Smith TORONTO, June 4 The Canadian dollar edged lower against its U.S. counterpart on Thursday as stocks fell and domestic data showed a plunge in exports, but global stimulus measures helped temper the decline, with the currency holding near an earlier three-month high. The Canadian dollar was trading 0.1% lower at 1.3508 to the greenback, or 74.03 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3468. "The CAD is holding near three-month highs largely because of broad, risk-on, USD sales that came in during the ECB's press conference this morning," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. The safe-haven U.S. dollar fell against a basket of major currencies after a decision by the European Central Bank to ramp up an emergency asset-purchase program to shore up economies hurt by the coronavirus crisis bolstered the euro. Canada's central bank has also launched an asset-purchase program. It sees reason to be optimistic about the country's economic recovery but is keeping a close eye on how COVID-19 is affecting growth and demand in its key export markets, Bank of Canada Deputy Governor Toni Gravelle said. Canada posted a trade deficit of C$3.25 billion in April as exports fell by nearly 30% to the lowest level in more than 10 years at C$32.7 billion. Analysts had forecast exports would be C$42.1 billion. Wall Street retreated as investors hit the pause button in advance of Friday's jobs report, while the price of oil , one of Canada's largest exports, settled 0.3% higher. The loonie is likely to slip in coming months as a collapse in global trade and the prospect of a more prolonged slowdown from the pandemic put pressure on the currency, a Reuters poll showed. Canada's 10-year yield rose 5.8 basis points to 0.675%, its highest since April 15. (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney)

CANADA FX DEBT-Canadian dollar retreats from 3-month high as exports slump

Jun 04 2020

* Canadian dollar weakens 0.2% against the greenback * Canada posts a trade deficit of C$3.25 billion in April * Price of U.S. oil decreases 1.5% * Canada's 10-year yield was nearly unchanged at 0.619% By Fergal Smith TORONTO, June 4 The Canadian dollar weakened against its U.S. counterpart on Thursday, pulling back from an earlier near three-month high, as oil prices fell and domestic data showed a greater-than-expected plunge in exports due to the coronavirus crisis. Canada posted a trade deficit of C$3.25 billion in April as exports fell by nearly 30% to the lowest level in more than 10 years at C$32.7 billion. Analysts had forecast exports would be C$42.1 billion. "This dismal report adds to the evidence that the economy contracted sharply in April," said Ryan Brecht, a senior economist at Action Economics. "However, the reopening of the economy and recovery in energy prices in May suggests that April will mark the bottoming out of activity." On Wednesday, the Bank of Canada said the impact of the coronavirus pandemic on the global economy appears to have peaked, while the Canadian economy seems to have avoided worst-case scenario projections. The price of oil, one of Canada's major exports, dropped on doubts over the ability of crude producers to agree to extend record output cuts. U.S. crude oil futures were down 1.5% at $36.73 a barrel. The Canadian dollar was trading 0.2% lower at 1.3522 to the greenback, or 73.95 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3468. The loonie is likely to slip in coming months as a collapse in global trade and the prospect of a more prolonged slowdown from the coronavirus pandemic put pressure on the currency, a Reuters poll showed. Canadian government bond yields were mixed across a flatter curve on Thursday as investors weighed the European Central Bank's decision to ramp up its Pandemic Emergency Purchase Programme to 1.35 trillion euros, a level that was beyond what most analysts had predicted. The 10-year yield was nearly unchanged at 0.619%. (Reporting by Fergal Smith Editing by Nick Zieminski)

Canadian dollar likely to weaken in short term if no sign of vigorous recovery: Reuters poll

Jun 04 2020

TORONTO The Canadian dollar is likely to slip in coming months as a collapse in global trade and the prospect of a more prolonged slowdown from the coronavirus pandemic put pressure on the currency, a Reuters poll of analysts showed.

CANADA FX DEBT-Loonie notches 3-month high as BoC scales back crisis operations

Jun 03 2020

(Updates prices and details on productivity data) * Canadian dollar rises 0.2% against the greenback * Loonie touches a near 3-month high intraday at 1.3476 * Bank of Canada holds policy rate at 0.25% * Canadian bond yields rise across a steeper curve By Fergal Smith TORONTO, June 3 The Canadian dollar strengthened to a three-month high against its U.S. counterpart on Wednesday as investors bet on economic recovery and the Bank of Canada reduced the frequency of some emergency operations it introduced to support financial markets. The central bank held its key overnight interest rate steady at a record low of 0.25% and said the impact of the coronavirus pandemic on the global economy appeared to have peaked and the Canadian economy seemed to have avoided worst-case projections. It said it would reduce the frequency of its term repo operations to once per week, and its program to purchase bankers' acceptances to bi-weekly operations. World shares reached three-month highs as a closely watched survey of service sector activity in China recovered to pre-epidemic levels in May. Commodity-based currencies, such as the Canadian dollar, "have tended to rally recently with just a better outlook of increased growth coming out of the lockdowns," said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. The price of oil, one of Canada's major exports, rose to its highest since March despite doubts about the timing and scale of a potential extension to the oil supply pact among major producers. U.S. crude oil futures were up 0.5% at $37.01 a barrel. The Canadian dollar was trading 0.2% higher at 1.3490 to the greenback, or 74.13 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3476. It has rallied nearly 9% since hitting a four-year low in March. Canadian labor productivity grew by a record 3.4% in the first quarter as hours worked fell more sharply than business output because of lockdowns caused by the coronavirus pandemic, Statistics Canada said. Canadian government bond yields rose across a steeper yield curve, with the 10-year yield up 8.1 basis points at 0.623%. (Reporting by Fergal Smith; Editing by David Gregorio and Peter Cooney)

CANADA FX DEBT-Canadian dollar notches 3-month high as investors bet on global recovery

Jun 02 2020

(Adds strategist quotes and details throughout, updates prices) * Canadian dollar rises 0.4% against the greenback * Loonie touches its strongest since March 9 at 1.3483 * Price of U.S. oil increases 3.9% * Canada's 10-year yield rises nearly 1 basis point By Fergal Smith TORONTO, June 2 The Canadian dollar strengthened to a near three-month high against its U.S. counterpart on Tuesday as investors bet on global economic recovery and ahead of an interest rate decision by the Bank of Canada on Wednesday. The loonie was trading 0.4% higher at 1.3517 to the greenback, or 73.98 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3483. Gains for the loonie show that "markets are looking toward a brighter future," said Michael Goshko, corporate risk manager at Western Union Business Solutions. Canada runs a current account deficit and is a major producer of commodities, including oil, so its economy could particularly benefit from a pickup in the global flow of trade and capital. U.S. crude oil futures settled 3.9% higher at $36.81 a barrel on hopes that major crude producers will agree to extend output cuts and as countries and U.S. states begin to reopen after coronavirus lockdowns. The recovery effort bolstered world stocks , winning out over U.S.-China tensions and the worst civil unrest in the United States in decades. "As equities continue to surge higher, the U.S. dollar continues to decline against most currencies, unwinding the safe haven trade," Goshko said. The U.S. dollar extended its decline since March against a basket of major currencies , while Canada's 10-year was up nearly 1 basis point at 0.542%. Economists say that Canada's economy likely bottomed out in April when non-essential businesses across the country were closed to help contain the coronavirus pandemic. Attention has been turning to how fast the economy can recover and the potential level of fiscal and monetary policy support. The Bank of Canada is expected to hold interest rates at a record low of 0.25% on Wednesday, when Tiff Macklem will begin his seven-year term as governor of the central bank. (Reporting by Fergal Smith; editing by Jonathan Oatis and Cynthia Osterman)

CANADA FX DEBT-Canadian dollar surges to 3-month high as investors unload the greenback

Jun 01 2020

* Canadian dollar rises 1.5% against the greenback * Loonie touches its strongest intraday since March 9 at 1.3558 * Canadian factory activity contracts at a slower pace in May * Canada's 5-year yield was little changed at 0.394% By Fergal Smith TORONTO, June 1 The Canadian dollar strengthened to a near three-month high against its U.S. counterpart on Monday as liquidity measures introduced by the Federal Reserve during the coronavirus crisis weighed on the greenback. The Canadian dollar was trading 1.5% higher at 1.3571 to the U.S. dollar, or 73.69 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3558. "It just seems like everyone wants to sell (U.S.) dollars right now," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. "The Fed has implemented many measures to make sure that the world is awash in U.S. dollars." In March, when financial markets were crashing, the greenback was greatly sought after. Global stocks rallied on Monday, bolstered by hopes of economic recovery. Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to benefit from rising risk appetite. "We've probably got enough juice to test the 1.34 handle in dollar-CAD," Rai said Canadian manufacturing activity contracted at a less severe pace in May than in April. The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) rose to a seasonally adjusted 40.6 from a record low 33.0. U.S. crude oil futures were up 0.3% at $$35.60 a barrel, supported by reports that OPEC and Russia were closer to a deal on extending oil cuts. Bleak domestic GDP data on Friday has been taken in stride by the market, with economists turning attention to how fast the economy can recover from the coronavirus crisis and the potential level of fiscal and monetary policy support. A Bank of Canada interest rate decision is due on Wednesday, when Tiff Macklem will take over as governor. Canada's 5-year yield was little changed at 0.394% on Monday. (Reporting by Fergal Smith; editing by Grant McCool Editing by Nick Zieminski)

CANADA FX DEBT-Loonie notches weekly gain as investors look past bleak data

May 29 2020

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar dips 0.1% against greenback * Loonie touches strongest intraday since March 12 at 1.3714 * Canada's April GDP falls 11% in flash estimate * Canadian bond yields decline across flatter curve By Fergal Smith TORONTO, May 29 The Canadian dollar edged lower against its U.S. counterpart on Friday but largely kept hold of this week's rally as investors took in stride bleak domestic GDP data and looked ahead to a policy decision next week from the Bank of Canada. The loonie was trading 0.1% lower at 1.3775 to the greenback, or 72.60 U.S. cents. The currency touched its strongest intraday level since March 12 at 1.3714. For the week, the loonie was up 1.6% as investors grew more optimistic about economic recovery, while it ended higher for the second straight month. Canada's GDP fell at an annualized rate of 8.2% in the first quarter and an estimated 11% month-over-month in April, when the coronavirus outbreak shuttered non-essential businesses across the country. [ "Our expectation is for a 40% plunge in Q2 as the economy is devastated by the lockdowns," said Ryan Brecht, a senior economist at Action Economics. "The easing of those measures so far in May suggests that the economy bottomed out in April." The price of oil, one of Canada's major exports, was bolstered by growing fuel demand even as investors worried about worsening Washington-Beijing relations. U.S. crude oil futures settled 5.3% higher at $35.49 a barrel. A Bank of Canada interest rate decision is set for next Wednesday, when Tiff Macklem will take over as governor. The current governor, Stephen Poloz, is due to retire next Tuesday. "Poloz on the way out has generally been quite optimistic," said Amo Sahota, director at Klarity FX in San Francisco. "Are we going to get a change in tone?" Canada's central bank will hold interest rates at a record low of 0.25% until at least the end of next year, a Reuters poll showed. Canada's 10-year government bond yield eased 2.4 basis points to 0.536%. (Reporting by Fergal Smith Editing by Paul Simao and Grant McCool)

CANADA FX DEBT-Canadian dollar retreats from 2-1/2-month high after sharp GDP drop

May 29 2020

* Canadian dollar trades near flat against greenback * Loonie touches strongest intraday since March 12 at 1.3714 * Canada's April GDP falls 11% in flash estimate * Canadian bond yields decline across flatter curve By Fergal Smith TORONTO, May 29 The Canadian dollar was little changed against its broadly weaker U.S. counterpart on Friday as data showed a deep slump in the domestic economy in the first quarter, with the loonie pulling back from an earlier two-and-a-half-month high. Canada's GDP fell at an annualized rate of 8.2% in the first quarter as a result of reduced spending and widespread shutdowns of non-essential businesses in March due to the coronavirus pandemic, Statistics Canada said. In a flash estimate, Canada's national statistics agency projected an 11% decline for GDP in April from March. "Our expectation is for a 40% plunge in Q2 as the economy is devastated by the lockdowns," said Ryan Brecht, a senior economist at Action Economics. "The easing of those measures so far in May suggests that the economy bottomed out in April." The Canadian dollar was trading nearly unchanged at 1.3767 to the greenback, or 72.64 U.S. cents. The currency touched its strongest intraday level since March 12 at 1.3714. For the week, the loonie was on track to gain 1.6%. The decline for the loonie came as the price of oil, one of Canada's major exports, was dragged lower by weak U.S. fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in U.S.-China relations. U.S. crude prices were down 2.4% at $32.9 a barrel. Global stock markets fell as investors awaited Washington's response to China's move to tighten control over Hong Kong, while the U.S. dollar lost ground against a basket of major currencies. Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 2.9 basis points at 0.531%. (Reporting by Fergal Smith Editing by Paul Simao)

CANADA FX DEBT-Canadian dollar lags G10 currencies as investors dread GDP data

May 28 2020

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar dips 0.2% against the greenback * Canada's current account deficit widens to C$11.1 billion * Price of U.S. oil increases 2.7% * Canadian bond yields rise across the curve By Fergal Smith TORONTO, May 28 The Canadian dollar was the only G10 currency to lose ground against the greenback on Thursday as data showed a widening in Canada's current account deficit and ahead of data that was expected to show a slump in Canada's economy. The loonie was trading 0.2% lower at 1.3779 to the greenback, or 72.57 U.S. cents. Still, the currency has rebounded more than 6% since hitting a four-year low in March. "It has come a long way," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. "A lot of people were perplexed by the strength up to this point." Some of the cause of the loonie's underperformance on Thursday was due to a wider-than-expected current account deficit, Chandler added. The current account deficit widened to C$11.1 billion in the first quarter from a revised C$9.3 billion in the fourth quarter, on a higher trade in goods and services deficit, Statistics Canada said. A wider current account deficit could leave the loonie more sensitive to moves in the global flow of capital. Data on first-quarter and March GDP are due on Friday. Economists expect that Canada's economy contracted by an annualized rate of 10% in the first quarter, while an even deeper slump is anticipated in the second quarter after businesses across the country were closed to help contain the spread of the coronavirus pandemic. "I do believe there may be some trepidation about GDP," Chandler said. He expects second-quarter GDP to shrink at an annualized rate of 40%. The price of oil, one of Canada's major exports, erased earlier losses on signs U.S. gasoline demand is rising. U.S. crude oil futures settled 2.7% higher at $33.71 a barrel. Canadian government bond yields rose across the curve, with the 10-year up 1.9 basis points at 0.567%. (Reporting by Fergal Smith; Editing by Andrea Ricci)

Strategists lower their sights for Canada's TSX after COVID-19 shock: Reuters poll

May 28 2020

TORONTO Canada's main stock index is set to extend its rebound over the coming months as well as in 2021, but will fall short of previous expectations as the global economy struggles to fully recover from the coronavirus crisis, a Reuters poll found.

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