CANADA FX DEBT-C$ strengthens to 9-month high as oil rallies

Wed Apr 27, 2016 9:28am EDT
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* Canadian dollar at C$1.2594, or 79.40 U.S. cents
    * Bond prices higher across the maturity curve

    TORONTO, April 27 (Reuters) - The Canadian dollar
strengthened to a nine-month high against its U.S. counterpart
on Wednesday as oil rose, while investor attention turned to the
Federal Reserve interest rate announcement later in the session.
    The loonie has rallied more than 16 percent from a 12-year
low in January of C$1.4689, helped by better-than-expected
domestic economic activity, fiscal stimulus and rebounding oil
    Oil prices on Wednesday reached their highest level of 2016,
driven by a falling dollar and evidence of declining U.S.
supply. U.S. crude prices were up 2.02 percent to $44.93
a barrel.  
    A shift in expectations for the direction of Bank of Canada
interest rates has added to recent support for the loonie. The
market has swung from implying at the start of March a more than
50 percent chance of a rate cut this year to implying modest
risk of a hike, overnight index swaps (OIS) showed. 
    At 9:08 a.m. EDT (1308 GMT), the Canadian dollar 
was trading at C$1.2594 to the greenback, or 79.40 U.S. cents,  
 stronger than Tuesday's close of C$1.2621, or 79.23 U.S. cents.
    The currency's weakest level was C$1.2632, while it touched
its strongest since July 6 last year at C$1.2571.
    On Tuesday, the currency saw little reaction to comments
from Bank of Canada Governor Stephen Poloz that it would take
another significant economic shock for the central bank to
consider cutting rates again. 
    In its announcement scheduled for 2 p.m. ET (1800 GMT), the
U.S. Federal Reserve is expected to keep interest rates
unchanged as it continues to monitor the impact from weakening
global growth but may seek to signal to markets it is determined
to resume policy tightening this year. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3 Canadian
cents to yield 0.682 percent and the benchmark 10-year
 rising 8 Canadian cents to yield 1.543 percent.
    The 10-year yield reached on Tuesday its highest since Dec.
7 at 1.577 percent.

 (Reporting by Fergal Smith Editing by W Simon)