Canadian dollar weaker as rate outlook diverges
By Alastair Sharp
TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback made broad-based gains, with domestic equities underperforming and investors eyeing a Federal Reserve interest rate hike by the end of the year.
While tighter Canadian housing rules announced on Monday could lower barriers to a near-term Bank of Canada rate cut, most economists expect domestic rates to be stuck on hold.
"I think the Bank of Canada would rather see a C$1.35 dollar/Canada than have to cut," said Darcy Browne, managing director of foreign exchange sales at CIBC Capital Markets.
The Canadian dollar CAD=D4 ended the day trading at C$1.3194 to the greenback, or 75.79 U.S. cents, weaker than Monday's close of $1.3110, or 76.28 U.S. cents.
Canada's main stock index fell 1.1 percent, compared to losses of between 0.2 percent and 0.5 percent for Wall Street. [.TO][.N]
The spread between Canadian and U.S. 10-year yields widened by 1.4 basis points to 62.2 basis points, its widest since March.
Browne said that a weaker-than-expected jobs report on Friday could definitively push the loonie past its 200-day moving average of C$1.3221.
The currency's strongest level of the session was C$1.3114, while its weakest was C$1.3215. Continued...