CANADA FX DEBT-C$ recovers from 12-yr low as Poloz leaves rate cut doubt

Thu Jan 7, 2016 4:46pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

(Updates prices to close)
    * Canadian dollar settles at C$1.4097, or 70.94 U.S. cents
    * Bond prices lower across maturity curve

    By Fergal Smith
    TORONTO, Jan 7 (Reuters) - The Canadian dollar slipped
against its U.S. counterpart on Thursday as oil prices fell for
a fourth day, although it was helped off a fresh 12-year low
after a speech by Bank of Canada Governor Stephen Poloz left
doubt about a rate cut. 
    The latest tumble in crude oil prices and the loss of
momentum in the Canadian economy has led to speculation that
Canada's central bank will cut interest rates. But
some analysts said Poloz's speech and subsequent press
conference did not seem to hint at a cut.
    "There's no smoking gun," said Andrew Kelvin, senior rates
strategist at TD Securities.
    Weakness in the Canadian dollar is the most important factor
in helping Canada adjust to low commodity prices, Poloz said in
a speech on economic and financial divergence, pledging to steer
monetary policy independently of the U.S. Federal Reserve.
 
    His comments implied that a weaker Canadian dollar
facilitates a transition to a world of lower oil or commodity
prices, according to Paul Ferley, assistant chief economist at
Royal Bank of Canada.
    The Canadian dollar settled at C$1.4097 to the
greenback, or 70.94 U.S. cents, slightly weaker than the Bank of
Canada's official close on Wednesday of C$1.4080, or 71.02 U.S.
cents.
    The currency's strongest level of the session was C$1.4051,
while it hit its weakest level since July 2003 at C$1.4170.
    "Markets were maybe looking for a bit stronger a signal of
rate cuts, but by no means are they off the table," said TD's
Kelvin.
    The pace of purchasing activity in Canada decreased in
December as a slowdown in inventories outweighed a pickup in
employment, according to Ivey Purchasing Managers Index data.
 
    Oil prices lurched again to 12-year lows as new financial
market tumult in China brought a $30 per barrel handle within
view. 
    U.S. crude prices settled down 2 percent at $33.27 a
barrel, while Brent crude lost 1.5 percent to $33.71.
 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down 1
Canadian cent to yield 0.417 percent and the benchmark 10-year
 up 4 Canadian cents to yield 1.324 percent.

 (Additional reporting by Alastair Sharp; Editing by Meredith
Mazzilli and Chris Reese)