October 24, 2016 / 2:32 PM / 10 months ago

CANADA FX DEBT-C$ weakens to fresh 7-month low as oil falls

* Canadian dollar at C$1.3339, or 74.97 U.S. cents
    * Loonie touches weakest level since March 16 at C$1.3359
    * Bond prices lower across yield curve

    TORONTO, Oct 24 (Reuters) - The Canadian dollar weakened to
a fresh seven-month low against its U.S. counterpart on Monday
as oil prices fell, but pared some losses after
stronger-than-expected domestic wholesale trade data.
    The value of Canadian wholesale trade rose 0.8 percent in
August, the fifth consecutive monthly gain, Statistics Canada
said. The increase exceeded the 0.6 percent month-on-month
advance predicted by analysts in a Reuters poll. 
    The price of U.S. crude was down 0.92 percent at
$50.38 a barrel as Iraq said it wanted to be exempt from a deal
by the Organization of the Petroleum Exporting Countries to cut
production. 
    Losses for the loonie came after the Bank of Canada
acknowledged it had considered cutting interest rates at a
policy meeting last week.
    At 10:01 a.m. EDT (1401 GMT), the Canadian dollar 
was trading at C$1.3339 to the greenback, or 74.97 U.S. cents,
slightly weaker than Friday's close of C$1.3327, or 75.04 U.S.
    The currency's strongest level of the session was C$1.3326,
while it touched its weakest point since March 16 at C$1.3359.
    The implied probability of a Bank of Canada rate cut by
mid-2017 steadied at around 40 percent, after having jumped from
around 30 percent before weaker-than-expected domestic retail
sales and inflation data on Friday. 
    Canada is in a very good fiscal situation and should not be
worried about running up deficits at this point, Bank of Canada
Governor Stephen Poloz said in a television interview aired on
Sunday. 
    The Bank of Canada and Canadian government on Monday renewed
the central bank's inflation target, at the midpoint of a 1
percent to 3 percent range, for another five years, opting to
bypass alternative policy goals.    
    Speculators increased bearish bets on the Canadian dollar to
the highest level since March, Commodity Futures Trading
Commission data showed on Friday. Net short Canadian dollar
positions rose to 14,298 contracts in the week ended Oct. 18
from 11,704 in the prior week. 
    Canadian government bond prices were slightly lower across
the yield curve, with the two-year price down 0.5
Canadian cent to yield 0.525 percent and the benchmark 10-year
 falling 3 Canadian cents to yield 1.134 percent.
    Concerns that a trade deal between the European Union and
Canada could be in trouble were heightened after the premier of
Belgium's Wallonia region insisted ahead of a crisis meeting of
regional leaders with Belgian Prime Minister Charles Michel that
he would not agree to the deal under pressure.  

 (Reporting by Fergal Smith; Editing by Paul Simao)

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