3 Min Read
By Jennifer Kwan
TORONTO, June 4 (Reuters) - The Canadian dollar was lower against the greenback on Thursday morning, ahead of the Bank of Canada rate announcement as investors awaited any statements about the currency's recent rally.
The rate decision itself is seen as a "non-event" since the central bank has said it plans to leave interest rates low, currently at 0.25 percent, until next year, said George Davis, chief technical strategist RBC Capital Markets.
But market watchers are anticipating the bank will address the currency's surge -- in May alone it rose a massive 9.3 percent -- as well as offer further guidance on its framework for unconventional policy. [ID:nN02506478]
"I think the concern the Bank of Canada might have is an excessively strong currency may serve as a headwind in terms of any pending economic recovery," said Davis.
"If the Bank of Canada does hint that the currency is serving as a bit of a hindrance to a recovery scenario then we're likely to see some position squaring, people getting out of their long Canadian dollar positions."
If they don't say anything, Davis said he would expect the currency to rally further, especially given that equity markets largely stabilized overnight and commodity markets are higher.
The price of oil CLc1 staged a comeback above $67 a barrel after a sharp drop in the previous session, boosted by increased oil price forecasts from U.S. investment bank Goldman Sachs (GS.N).
At 8:00 a.m. (1200 GMT), the Canadian currency was at C$1.1151 to the U.S. dollar, or 89.68 U.S. cents, down from Wednesday's session close at C$1.1084 to the U.S. dollar, or 90.22 U.S. cents.
Overnight, the unit gained as much as C$1.1020 to the U.S. dollar, or 90.74 U.S. cents.
BONDS MOSTLY LOWER
Canadian bond prices were mostly lower across the curve, as Toronto followed U.S. Treasuries lower on lingering concerns about a spike in government debt issuance. [ID:nL4611253]
The benchmark two-year government bond was unchanged at C$100.18 to yield 1.158 percent, while the 10-year bond fell 20 Canadian cents to C$103.30 to yield 3.358 percent.
The 30-year bond dropped 40 Canadian cents to C$117.10 to yield 3.981 percent. The comparable U.S. Treasury issue yielded 4.4903 percent. (Reporting by Jennifer Kwan; Editing by Theodore d'Afflisio)