June 25, 2018 / 8:22 PM / 5 months ago

CANADA FX DEBT-C$ slips as trade tensions slam investor risk appetite

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar at C$1.3305, or 75.16 U.S. cents
    * The price of U.S. oil falls 0.7 percent
    * Bond prices higher across a flatter yield curve
    * 10-year yield touches its lowest since March 29 at 2.082
percent
   

    By Fergal Smith
    TORONTO, June 25 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday as rising global trade
tensions led to a sell-off in stock markets and as oil prices
fell.
    At 4 p.m. EDT (2100 GMT), the Canadian dollar          was
trading 0.3 percent lower at C$1.3305 to the greenback, or 75.16
U.S. cents.
    The currency traded in a range between C$1.3270 and
C$1.3325. On Friday, it touched its weakest in one year at
C$1.3384.
    "There is a bit of a risk-off feeling this morning in the
market which is pushing the U.S. dollar higher against the
Canadian dollar," said Simon Côté, managing director, risk
management solutions at National Bank Financial. "You see the
stock market getting hit."
    Wall Street was pummeled by a growing trade dispute between
the United States and other leading economies.             
    Canada exports many commodities and runs a current account
deficit so its economy could be hurt if the flow of trade or
capital slows.
    The price of oil fell as equity markets tumbled and as
investors prepared for an extra one million barrels per day of
crude to hit the markets after OPEC agreed to raise production.
            
    U.S. crude oil futures        settled 0.7 percent lower at
$68.08 a barrel. 
    Adding to headwinds for the loonie was weaker-than-expected
domestic retail sales and inflation data on Friday, which has
lowered expectations for a Bank of Canada interest rate increase
next month.                         
    Chances of a rate hike at the July 11 announcement have
fallen to less than 50 percent from about 70 percent before the
data, the overnight index swaps market showed.           
    Bank of Canada Governor Stephen Poloz will give a speech on
Wednesday. 
    "As we have seen in the past our central bank governor has
been leaning on any weak Canadian number that he can to justify
not raising interest rates," Côté said. "I would be very
surprised to see Poloz being hawkish." 
    Still, speculators have cut bearish bets on the Canadian
dollar for a second straight week, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed on
Friday. As of June 19, net short positions dipped to 14,014
contracts from 14,988 a week earlier.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with safe-haven assets such as
Treasuries, with the 10-year             rising 27 Canadian
cents to yield 2.094 percent.
    The 10-year yield touched its lowest since March 29 at 2.082
percent.

 (Reporting by Fergal Smith; Editing by Marguerita Choy and
Grant McCool)
  
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