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Fergal Smith

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

4:43pm EDT

(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 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)

CANADA FX DEBT-C$ hits 4-month low as Bank of Canada rate cut bets climb

11:02am EDT

(New throughout, updates prices and market activity, adds details and comment from strategist) * Canadian dollar falls 0.6% against the greenback * Loonie touches its weakest since Jan. 3 at 1.3522 * Price of U.S. oil falls 0.4% * Canada-U.S. 10-year spread posts widest in nearly one month By Fergal Smith TORONTO, April 24 The Canadian dollar weakened against its U.S. counterpart on Wednesday to its lowest in nearly four months, 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 rates 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%. "They brought more of the weakness on board than we expected them to." said Andrew Kelvin, senior rates strategist at TD Securities. 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 - its 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 nearly 70% from 57% before the policy announcement, data from the overnight index swaps market showed. Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins are due to hold a press conference at 11:15 ET (1515 GMT). Meanwhile, the U.S. dollar rose to a 22-month high as souring confidence measures in the euro zone weighed on the euro. At 10:36 a.m. (1436 GMT), the Canadian dollar was trading 0.6% lower at 1.3499 to the greenback, or 74.08 U.S. cents. The currency touched its weakest intraday level since Jan. 3 at 1.3522. The price of oil, one of Canada's major exports, 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 prices were down 0.4% at $66.06 a barrel . Canadian government bond prices were higher across the yield curve, with the two-year up 12.5 Canadian cents to yield 1.506%, its lowest since March 29, and the 10-year rising 78 Canadian cents to yield 1.668%. The 10-year yield fell 3.4 basis points further below the yield on the equivalent U.S. bond to a spread of -85.4 basis points, its widest since March 25. (Reporting by Fergal Smith; editing by Jonathan Oatis and David Gregorio)

CANADA FX DEBT-C$ hits 4-week low as investors see end to BoC's hiking bias

Apr 23 2019

(Adds strategist quotes and details throughout; updates prices) * Loonie falls 0.7% against the U.S. dollar * Canadian wholesale rises by 0.3 percent in February * Price of U.S. oil increases 1.1% * Canada-U.S. 2-year spread posts a one-month wide By Fergal Smith TORONTO, April 23 The Canadian dollar weakened to a nearly four-week low against its U.S. counterpart on Tuesday as the greenback climbed broadly and investors bet that the Bank of Canada would forgo language pointing to further interest rate hikes. Canada's central bank is expected to hold its benchmark interest rate steady at 1.75% on Wednesday and for the rest of this year, with calls for the next hike in early 2020 resting on a knife's edge, a Reuters poll showed. "Any hiking bias will probably be removed completely from the statement," said Ranko Berich, head of market analysis at Monex Canada and Monex Europe. "The impetus for a rate hike has been removed by slowing economic data." The Canadian economy has taken a hit from the province of Alberta's mandatory production cut of oil - its biggest export - a slowdown in the housing market and wilting business sentiment over worries surrounding the U.S.-China trade war. Canadian wholesale trade increased by 0.3 percent in February from January, Statistics Canada said on Tuesday. But trade was down 1.5% after excluding the motor vehicle and motor vehicle parts and accessories subsector. The U.S. dollar rose against a basket of major currencies as traders favored the greenback ahead of the release on Friday of U.S. gross domestic product data for the first three months of 2019. At 3:23 p.m. (1923 GMT), the Canadian dollar was trading 0.7% lower at 1.3436 to the greenback, or 74.43 U.S. cents, its biggest decline in nearly seven weeks. The currency touched its weakest level since March 29 at 1.3443. The decline for the loonie came despite a nearly six-month high for the price of oil as sources said Gulf OPEC members were ready to raise output only if there was demand before offsetting any shortfall following a U.S. decision to end waivers for buyers of Iranian crude. U.S. crude oil futures settled 1.1% higher at $66.30 a barrel. Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 8.5 Canadian cents to yield 1.576% and the 10-year was up 27 Canadian cents to yield 1.758%. Canada's two-year yield fell 1.9 basis points further below the yield on the equivalent U.S. bond to a spread of -78.8 basis points, its widest since March 22. (Reporting by Fergal Smith; Editing by Susan Thomas and Peter Cooney)

CANADA FX DEBT-Canadian dollar gains as oil climbs to near six-month high

Apr 22 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Price of U.S. oil increases 2.7% * Canadian bond prices trade mixed across a steeper yield curve * Gap between 2- and 10-year yields hits widest since March 1 By Fergal Smith TORONTO, April 22 The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices jumped to fresh multi-month highs, while investors awaited an interest rate decision this week from the Bank of Canada. The price of oil, one of Canada's major exports, rose to its highest since October on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports. U.S. crude oil futures settled 2.7% higher at $65.70 a barrel. "We all know how correlated the Canadian dollar is with crude oil," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. "We are seeing the Canadian dollar dribble higher but I would say the real party is on Wednesday." The Bank of Canada is expected to hold its benchmark interest rate steady at 1.75% on Wednesday and for the rest of this year, with calls for the next hike in early 2020 resting on a knife's edge, a Reuters poll showed. "What we are telling our clients, you just have to be on guard for something a little more cautious than the market is expecting," Bregar said. "I feel like the market is coiling up for a big move." Earlier this month, Bank of Canada Governor Stephen Poloz said trade uncertainties are weighing on Canada and the global economy, which is not performing as well as had been expected just a few months ago. Last week, a Bank of Canada survey showing softer business sentiment offset domestic data showing higher retail sales and underlying inflation. At 3:54 p.m. (1954 GMT), the Canadian dollar was trading up 0.4% at 1.3347 to the greenback, or 74.92 U.S. cents. The currency, which fell 0.5% last week, traded in a range of 1.3334 to 1.3389. Speculators have raised their bearish bets on the Canadian dollar to the highest since January, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of April 16, net short positions had climbed to 49,162 contracts from 43,202 in the prior week. Canadian government bond prices were mixed across a steeper yield curve in sympathy with U.S. Treasuries. The two-year gained 1 Canadian cent to yield 1.62% and the 10-year was down 21 Canadian cents to yield 1.788%. The 10-year yield rose 2.7 basis points further above the 2-year yield to a spread of 16.8 basis points, its widest since March 1. (Reporting by Fergal Smith; Editing by Lisa Shumaker)

CANADA FX DEBT-C$ retreats from 4-week high as market distrusts inflation uptick

Apr 17 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar near flat against the greenback * Annual inflation rate edges up to 1.9% in March * Trade deficit falls in February to C$2.9 billion * Canadian bond prices fall across the yield curve By Fergal Smith TORONTO, April 17 The Canadian dollar was little changed against its U.S. counterpart on Wednesday, pulling back from an earlier four-week high as investors doubted that a pick-up in domestic underlying inflation would be sustained. Canada's annual inflation rate edged up to 1.9% in March from 1.5% in February, while two out of three of the Bank of Canada's measures of core inflation edged up into the 2.0% range, Statistics Canada data indicated. The loonie notched its strongest intraday level since March 20 at 1.3275 after the data, but then gave back all its gains. "The market is skeptical that there is a true uptick in core inflation," said Adam Button, chief currency analyst at ForexLive. "Looking forward, if the acceleration in core inflation continues the market will have to change course." A shift in sentiment could see expectations unwind for an interest rate cut this year, Button said. Chances of a policy easing by December fell to 20% from about 25% before the data, the overnight index swaps market indicated. Separate data from Statistics Canada showed Canada's trade deficit declined for a second straight month in February, falling slightly to C$2.9 billion, after reaching a record high of C$4.8 billion in December 2018. At 4:02 p.m. (2002 GMT), the Canadian dollar was trading nearly unchanged at 1.3346 to the greenback, or 74.93 U.S. cents. The pullback for the loonie from an earlier four-week high came as the price of oil, one of Canada's major exports, turned lower. U.S. crude oil futures settled down 0.5% at $63.76 a barrel as U.S. government data showed inventories drew down less than an industry report had suggested on Tuesday, offsetting upbeat economic reports from China. A right-of-center party swept to power in Canada's main oil-producing province of Alberta on Tuesday and attacked Prime Minister Justin Trudeau's efforts to fight climate change, raising tension just months ahead of a federal election. Canadian government bond prices were lower across the yield curve, with the two-year down 4.5 Canadian cents to yield 1.658% and the 10-year falling 14 Canadian cents to yield 1.799%. The gap between Canada's two-year yield and its U.S. equivalent narrowed by 3.4 basis points to a spread of 74.6 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; Editing by Bill Trott and Grant McCool)

CANADA FX DEBT-C$ climbs off 11-day low as oil prices rise

Apr 16 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.1% against the greenback * Price of U.S. oil increases 1% * Canadian factory sales fall 0.2% in February * Canadian government bond prices fall across the yield curve By Fergal Smith TORONTO, April 16 The Canadian dollar edged higher against its U.S. counterpart on Tuesday, rebounding from an earlier 11-day low as higher oil prices offset weaker-than-expected domestic manufacturing data. At 3:09 p.m. (1909 GMT), the Canadian dollar was trading 0.1% higher at 1.3352 to the greenback, or 74.90 U.S. cents. The currency touched its weakest intraday since April 5 at 1.3403. The price of oil, one of Canada's major exports, rose as fighting in Libya and falling Venezuelan and Iranian exports raised concerns over tightening global supply. U.S. crude oil futures settled 1% higher at $64.05 a barrel. "Higher oil prices are helping the Canadian dollar," said Eric Viloria, an FX strategist at Crédit Agricole CIB. "They offered some cushion surrounding the weaker manufacturing sales." Canadian factory sales were down by 0.2% in February from January on lower sales of motor vehicles, as well as wood products, Statistics Canada said. Analysts had forecast no change. On Monday, a Bank of Canada quarterly survey showed that Canadian business sentiment has turned slightly negative, weighed by a weak energy sector, a housing slowdown and global trade tensions. "What we have seen is that there is still some soft Canadian data ... it would need to show some more meaningful improvement before the Canadian dollar can break out of its recent range," Viloria said. The loonie was nearly unchanged for the month of April after having climbed 2.2% since the start of 2019. Canada's inflation report for March and February trade data are due on Wednesday. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as investors favored riskier assets, such as stocks. The two-year fell 4.5 Canadian cents to yield 1.631% and the 10-year was down 23 Canadian cents to yield 1.783%. The Canadian province of Ontario, the world's biggest sub-sovereign debtor, faces an uphill task to balance the books in the coming years after its government failed to deliver a "trophy" cost saving in last week's budget, bond investors say. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Sandra Maler)

Bond investors see snag in Ontario's deficit reduction plan

Apr 16 2019

TORONTO, April 16 The Canadian province of Ontario, the world's biggest sub-sovereign debtor, faces an uphill task to balance the books in the coming years after its government failed to deliver a "trophy" cost saving in last week's budget, bond investors say.

CANADA FX DEBT-C$ slides as rate cut bets climb on weaker business sentiment

Apr 15 2019

(Adds strategist comment and details throughout; updates prices) * Canadian dollar falls 0.4% against the greenback * BoC survey shows business sentiment turning negative * Canadian home sales increase 0.9% month-over-month in March * Price of U.S. oil falls 0.8% * Canadian government bond prices rise across yield curve By Fergal Smith TORONTO, April 15 The Canadian dollar weakened against its U.S. counterpart on Monday, as domestic data showing softer business sentiment triggered increased bets on a Bank of Canada interest rate cut this year. Canada's weak energy sector, a housing slowdown and global trade tensions are weighing on business sentiment, which has turned slightly negative, according to a Bank of Canada quarterly survey. The weaker survey "strongly suggests the BoC will be on hold through the rest of this year, though the risks are tilted toward a cut, should a negative shock hit," Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, said in a note. Chances of a rate cut by December doubled to about 40% after the data, the overnight index swaps market indicated. Adding to headwinds for the loonie, the price of oil, one of Canada's major exports, fell after Russia's finance minister said Russia and OPEC may decide to boost production to fight for market share with the United States, where output remains at record highs. U.S. crude oil futures settled 0.8% lower at $63.40 a barrel. At 3:44 p.m. (1944 GMT), the Canadian dollar was trading 0.4% lower at 1.3372 to the greenback, or 74.78 U.S. cents. The currency, which rose 0.5% last week, traded in a range of 1.3298 to 1.3390. Canadian home sales rose 0.9% month-over-month in March, edging higher after a sharp drop in the previous month, the Canadian Real Estate Association said on Monday. Canadian government bond prices were higher across the yield curve, with the two-year up 6.5 Canadian cents to yield 1.603% and the 10-year rising 28 Canadian cents to yield 1.750%. The gap between Canada's two-year yield and its U.S. equivalent widened by 2.6 basis points to a spread of 78.6 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; Editing by Susan Thomas and Peter Cooney)

CANADA FX DEBT-C$ rallies as U.S. stocks approach record highs

Apr 12 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Price of U.S. oil increases 0.5% * Loonie ends up 0.5% for the week * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, April 12 The Canadian dollar strengthened against its U.S. counterpart on Friday, adding to this week's gains as oil prices rose and U.S. stocks climbed back to near record highs. The S&P 500 moved within a percent of September's record closing high after the largest U.S. bank soothed worries that the first-quarter earnings season would pour cold water on Wall Street's big rally back from last year's slump. Canada is a major exporter of commodities, including oil, so its currency tends to benefit from the positive signal higher stock prices send about the outlook for the global economy. "On the back of (U.S.) dollar weakness and a better risk tone, the loonie is getting a little bit of a bid," said Erik Nelson, a currency strategist at Wells Fargo. The U.S. dollar declined against a basket of major currencies, while oil prices rose as involuntary supply cuts from Venezuela, Libya and Iran supported perceptions of a tightening market. U.S. crude oil futures settled 0.5% higher at $63.89 a barrel. At 3:58 p.m. (1958 GMT), the Canadian dollar was trading 0.4% higher at 1.3329 to the greenback, or 75.02 U.S. cents. The currency, which was up 0.5% for the week, traded in a range of 1.3313 to 1.3386. The loonie made ground despite data showing Canadian home prices fell in March for the sixth straight month. Data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed that speculators have cut their bearish bets on the Canadian dollar. As of April 9, net short positions had dipped to 43,202 contracts from 44,323 in the prior week. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 8.5 Canadian cents to yield 1.633% and the 10-year was down 54 Canadian cents to yield 1.784%, its highest yield since March 12. (Reporting by Fergal Smith; editing by Grant McCool)

UPDATE 1-Canada’s Ontario aims to slay deficit in five years as it limits spending

Apr 11 2019

TORONTO, April 11 Ontario's Conservative government, presenting its first budget on Thursday, forecast a smaller deficit for the Canadian province in the current fiscal year and a return to balance by 2023-24 as it disclosed plans to reverse the growth in spending.

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