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

Thu Jan 7, 2016 11:55am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* Canadian dollar at C$1.4071, or 71.07 U.S. cents
    * Bond prices lower across maturity curve

    By Fergal Smith
    TORONTO, Jan 7 (Reuters) - The Canadian dollar recovered
from a fresh 12-year low against its U.S. counterpart on
Thursday after a speech by Bank of Canada Governor Stephen Poloz
left doubt about a rate cut and oil prices rebounded from nearly
12-year lows. 
    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.
    At 11:27 a.m. EST (1627 GMT), the Canadian dollar 
was trading at C$1.4071 to the greenback, or 71.07 U.S. cents,
slightly stronger 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 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 steadied after falling earlier to nearly 12-year
lows as short-covering helped crude futures rebound from
sentiment dented by a tumbling Chinese stock market.
    U.S. crude prices were unchanged at $33.97 a barrel,
while Brent crude added 0.44 percent to $34.38. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 5.5
Canadian cents to yield 0.438 percent and the benchmark 10-year
 falling 18 Canadian cents to yield 1.348 percent.
    The Canada-U.S. two-year bond spread was 2.3 basis points
narrower at -54.6 basis points as Canadian government bonds
underperformed on reduced expectation of a Bank of Canada rate

 (Editing by Meredith Mazzilli)