December 7, 2017 / 9:58 PM / in 9 days

CANADA FX DEBT-C$ adds to losses on dovish Bank of Canada

 (Adds dealer quotes and details on BoC rate hike chances;
updates prices)
    * Canadian dollar at C$1.2851, or 77.81 U.S. cents
    * Loonie touches weakest since Friday at C$1.2868,
    * Bond prices mixed across yield curve
    * Canada-U.S. 10-year spread widens 3.4 basis points

    By Fergal Smith
    TORONTO, Dec 7 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, adding to losses from
the previous session, when the Bank of Canada held interest
rates steady and tempered expectations for a hike early next
year.
    The central bank struck a more dovish tone than investors
had expected after last week's strong employment data.
                         
    "If the loonie had a stocking hanging on the chimney, it
would probably find coal in it," said Brad Schruder, director of
corporate sales and structuring at BMO Capital Markets.
    "Between now and the end of the year, you are probably going
to see the Canadian dollar lose anywhere from another 2 cents to
2-1/2 cents in value against the U.S. dollar," he added.
    Chances of an interest rate hike in January have dropped to
less than 30 percent from 41 percent before Thursday's decision
to hold steady, the overnight index swaps market indicated
          .
    The Bank of Canada raised rates in July for the first time
in seven years, and then again in September. Its benchmark
interest rate is 1 percent.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2851 to the greenback, or 77.81 U.S. cents, down
0.5 percent.
    The currency, which touched its weakest since Friday at
C$1.2868, lost ground despite firm domestic data and a higher
price of oil, one of Canada's major exports.
    U.S. crude futures        settled 1.3 percent higher at
$56.69 a barrel due to a threatened strike in Nigeria.      
    The value of Canadian building permits increased 3.5 percent
in October from September, more than economists had expected.
            
    Still, the Canadian dollar is likely to strengthen over the
coming year, a Reuters poll showed, on assumptions that
uncertainty over trade lifts and a stronger economy boosting
inflation will prompt the Bank of Canada to resume raising
rates.             
    The U.S. dollar        reached a two-week high against a
basket of currencies on optimism that the United States will
push through a tax overhaul.             
    Canadian government bond prices were little changed across
the yield curve, with the two-year            down 1 Canadian
cent to yield 1.495 percent and the 10-year             rising 2
Canadian cents to yield 1.855 percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 3.4 basis points to a spread of -50.7
basis points.

 (Reporting by Fergal Smith, editing by G Crosse)
  
 

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