February 6, 2019 / 10:23 PM / 3 months ago

CANADA FX DEBT-C$ hits one-week low as Wall Street rally stalls

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.6 percent against the greenback
    * Loonie touches one-week low at 1.3211 per U.S. dollar
    * U.S. oil price settles 0.7 percent higher
    * Canadian bond prices rise across yield curve

    By Fergal Smith
    TORONTO, Feb 6 (Reuters) - The Canadian dollar weakened on
Wednesday to its lowest level in a week against the greenback as
the stock market rally dating to the start of the year lost some
momentum and the Bank of Canada warned that U.S. trade
uncertainty was hurting the economy.
    U.S. stocks edged lower, pulling back from a two-month high,
as video-game makers gave disappointing revenue forecasts and
investors awaited developments on U.S.-China trade relations.
            
    "Emerging market currencies are coming off, equities are
coming off, we are seeing a bit more volatility come through
markets the last couple of days," said Mark McCormick, North
American head of FX strategy at TD Securities.
    "The Canadian dollar is a high beta currency in the G10,
which means if equities are going down the Canadian dollar is
weakening as well," he said.  
    Canada is running a current account deficit and is a major
commodities producer, so its economy tends to be sensitive to
the global flow of trade and capital.
    U.S. crude oil futures        settled 0.7 percent higher at
$54.01 a barrel but gains were capped by a rising U.S. dollar
and ongoing concerns about a global economic slowdown.
            
    Uncertainty over U.S. trade policies is holding back
Canadian business investment despite strong economic
fundamentals, Bank of Canada Deputy Governor Timothy Lane said.
            
    The pace of purchasing activity in Canada slowed more than
expected to hit a four-month low in January, according to Ivey
Purchasing Managers Index data.             
    At 4:46 p.m. (2146 GMT), the Canadian dollar          was
trading 0.6 percent lower at 1.3211 to the greenback, or 75.69
U.S. cents. The currency touched its weakest intraday level
since last Wednesday at 1.3214.
    The loonie's decline came as the Australian dollar was
pressured by a surprise signal from the Reserve Bank of
Australia of a possible interest rate cut. Australia is also a
major produces of commodities.             
    Still, the loonie has rallied 3.3 percent since the start of
2019, which makes it the top-performing G10 currency.
    The Canadian dollar will extend this year's rally over the
coming 12 months, according to a Reuters poll of currency
strategists who expect the U.S. dollar to fall broadly and for
global monetary policy to stay looser than previously expected.
            
    The value of Canadian building permits increased by 6.0
percent in December from November, data from Statistics Canada
showed.                 
    Canadian government bond prices were higher across the yield
curve, with the 10-year             rising 12 Canadian cents to
yield 1.924 percent.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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