March 16, 2018 / 8:15 PM / a month ago

CANADA FX DEBT-C$ tumbles to 8-month low as traders see only gradual rate hikes

    * Canadian dollar at C$1.3093 or 76.38 U.S. cents
    * Bond prices mixed across the maturity curve

 (Adds details, quotes, byline, updates prices)
    By Leah Schnurr
    March 16 (Reuters) - The Canadian dollar touched a fresh
more than eight-month low against the greenback on Friday as the
market continued to assess how quickly more interest rate hikes
could come in the face of trade uncertainty with the United
States.
    The currency hit a session low of C$1.3099, its lowest since
June 28, shortly before the Bank of Canada began raising
interest rates last year.
    For the week, the currency shed 2.2 percent, putting it on
track for its biggest weekly decline since May 2016. 
    The loonie has been hit by comments from the head of the
Bank of Canada, who said on Tuesday that the economy may be able
to generate more growth without higher inflation, given the
untapped potential in the labor market.             
    Governor Stephen Poloz's remarks reinforced expectations the
central bank can take its time raising rates after hiking three
times since last July.
    "The market interpreted that as it means that it's far less
likely that the Bank of Canada will move forward with further
interest rate increases," said Sean Coakley, market strategist
at Cambridge Global Payments. 
    "At the same time, we've seen much more hawkish commentary
out of the Federal Reserve in the United States and that's
really positioned the U.S. dollar much stronger than the
loonie," said Coakley.
    At 4:02 p.m. EDT (2002 GMT), the Canadian dollar         
was trading down 0.3 percent at C$1.3093 to the greenback, or
76.38 U.S. cents.
    Markets also expect Canadian policymakers may wait for
greater clarity on the future of U.S. trade policy after worries
about a global trade war ramped up after President Donald Trump
imposed tariffs on steel and aluminum imports this month.
    While Canada was exempted, Trump said the reprieve would be
in place so long as there was progress on talks to renegotiate
the North American Free Trade Agreement.             
    On the economic front, Canadian factory sales in January
fell by 1.0 percent, the biggest drop in six months, on weakness
in motor vehicles, as well as aerospace products and parts.
            
    Foreign investment in Canadian securities resumed in January
after a dip in December but fell far short of the monthly
purchases seen in much of the second half of 2017.             
    Canadian government bond prices were mixed across the
maturity curve, with the two-year            price down 0.5
Canadian cent to yield 1.763 percent and the benchmark 10-year
            rising 4 Canadian cents to yield 2.141 percent.

 (Reporting by Leah Schnurr in Ottawa
Editing by Nick Zieminski and James Dalgleish)
  
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