June 13, 2017 / 1:52 PM / in 3 years

CANADA FX DEBT-C$ notches 2-month high as Poloz comments support rate hike view

    * Canadian dollar at C$1.3228, or 75.60 U.S. cents
    * Loonie touches its strongest since April 13 at C$1.3226
    * Bond prices lower across the yield curve
    * 2-year yield reaches a 2-year high at 0.914 percent

    TORONTO, June 13 (Reuters) - The Canadian dollar
strengthened to a two-month high against its U.S. counterpart on
Tuesday as comments by Bank of Canada Governor Stephen Poloz
supported the view that the central bank could raise interest
rates sooner than previously thought.
    The interest rates cuts the Bank of Canada made in 2015 have
largely done their job as the economy appears to be gathering
momentum, the head of the central bank said.             
    "Poloz today signaled that rates won't be on hold forever,"
said Nick Exarhos, economist at CIBC Capital Markets.
    Chances of an interest rate hike this year have surged to 72
percent from just 22 percent before stronger-than-expected jobs
data on Friday, data from the overnight index swaps market
    Most of the move came after hawkish comments on Monday from
Bank of Canada Senior Deputy Governor Carolyn Wilkins.
    Bearish bets on the loonie had held near a record high as of
June 6, data from the Commodity Futures Trading Commission and
Reuters calculations showed on Friday.             
    Strengthening of the currency could put pressure on
often-leveraged speculators to cover short positions and
accelerate any move higher in the currency.             
    At 9:32 a.m. ET (1332 GMT), the Canadian dollar          was
trading at C$1.3228 to the greenback, or 75.60 U.S. cents, up
0.7 percent.
    The currency's weakest level was C$1.3325, while it touched
its strongest since April 13 at C$1.3226.
    Gains for the loonie came even as prices of oil, one of
Canada's major exports, edged down after OPEC reported an
increase in its production for May.             
    U.S. crude        prices were down 0.22 percent at $45.98 a
    The U.S. dollar        inched down as traders eyed the start
of a two-day Federal Reserve meeting.             
    Canadian government bond prices were much lower across the
yield curve, with the two-year            down 12.5 Canadian
cents to yield 0.911 percent and the 10-year             falling
58 Canadian cents to yield 1.549 percent.
    The 2-year yield touched its highest intraday since January
2015 at 0.914 percent.   

 (Reporting by Fergal Smith; Editing by Nick Zieminski)
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