July 12, 2018 / 7:55 PM / 4 months ago

CANADA FX DEBT-C$ rebounds from 10-day low as commodity markets stabilize

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar at C$1.3166, or 75.95 U.S. cents
    * Loonie touches a 10-day low at C$1.3218
    * Price of U.S. oil dips 0.1 percent
    * Bond prices lower mixed across the yield curve

    By Fergal Smith
    TORONTO, July 12 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Thursday,
rebounding from an earlier 10-day low, as oil prices steadied
and investors weighed prospects of additional Bank of Canada
interest rate hikes.
    Stocks rose and the price of oil stabilized, having suffered
tailpins in the previous session as the United States ratcheted
up trade war threats on China.             
    U.S. crude oil futures        settled 0.1 percent lower at
$70.33 a barrel.
    Canada exports many commodities, including oil, and runs a
current account deficit so its economy could be hurt if the flow
of trade or capital slows.
    The steadier profile for oil helped investors focus on the
message the Bank of Canada sent on Wednesday about the prospect
of additional rate hikes.
    "The bank is serious about removing accommodation," said
Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets. "I think that is more of a    
factor in the medium term than a one day move in oil prices."
    The central bank raised rates on Wednesday for the fourth
time since July 2017, bring borrowing costs to 1.50 percent
-about halfway back from ultra-low levels of 2015 to a neutral
rate that neither boosts nor hinders growth.             
    It said higher rates will be warranted to keep inflation
near target. Money markets see a roughly 60 percent chance of
another hike by December.           
    At 3:30 p.m. EDT (1930 GMT), the Canadian dollar         
was trading 0.3 percent higher at C$1.3166 to the greenback, or
75.95 U.S. cents.
    The currency touched its weakest intraday since July 2 at
C$1.3218.    
    Canadian home prices rose in June from May, the fourth
straight rise after weakness late last year, returning national
prices to just barely above the previous peak in August 2017,
the Teranet-National Bank Composite House Price Index showed.
                
    Separate data from Statistics Canada showed that new home
prices in Canada were flat in May for a third month in a row. 
            
    Canadian government bond prices were mixed across the yield
curve after U.S. data pointed to a steady buildup of inflation
pressures that could keep the Federal Reserve on a path of
gradual interest rate increases.             
    The two-year            rose 1 Canadian cents to yield 1.946
percent and the 10-year             declined 8 Canadian cents to
yield 2.160 percent.
    On Wednesday, the 2-year yield touched its highest in nearly
seven weeks at 1.977 percent.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Grant
McCool)
  
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