March 18, 2019 / 8:34 PM / 8 months ago

CANADA FX DEBT-C$ near flat ahead of federal budget, Fed rate decision

 (Adds strategist quotes and details on activity; updates
prices)
    * Foreign investment in Canadian securities rebounds in
January
    * Price of U.S. oil rises nearly one percent
    * Canadian bond prices were little changed across the yield
curve

    By Fergal Smith
    TORONTO, March 18 (Reuters) - The Canadian dollar was little
changed against the greenback on Monday as investors weighed the
potential impact of Tuesday's federal budget on Canada's fiscal
deficit and bet that the U.S. Federal Reserve will strike a
dovish tone this week.
    With a federal election looming and Prime Minister Justin
Trudeau's government facing its worst political crisis in four
years, Canada's ruling Liberals are expected to table a
goody-filled budget in a bid to get back on course with voters.
                
    At 4:05 p.m. (2005 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3341 to the greenback, or 74.96
U.S. cents. The currency, which advanced 0.6 percent last week,
traded in a range of 1.3304 to 1.3365.
    "Maybe we have seen a lot of the good news in Canada already
as far as the currency is concerned," said Hosen Marjaee, senior
portfolio manager at Manulife Asset Management. "If the deficit
widens much more than expectations there might be a hit to the
currency."
    Canada finances its fiscal deficit, which is about 1 percent
of gross domestic product, by selling bonds to domestic and
foreign investors.             
    Foreign investors bought a net C$28.40 billion in Canadian
securities in January, led by federal government bonds,
following a revised C$20.49 billion total divestment in
December, Statistics Canada said on Monday.             
    The U.S. dollar        declined against a basket of major
currencies ahead of the Fed interest rate decision on Wednesday.
Traders expect there will be no Fed rate hikes this year, and
are even building in bets for a rate cut in 2020.
                        
    The price of oil, one of Canada's major exports, was
supported by the prospect of prolonged OPEC-led oil supply curbs
and signs of inventory declines in U.S. crude stockpiles.
            
    U.S. crude oil futures        settled nearly 1 percent
higher at $59.09 a barrel.
    Canadian government bond prices were little changed across
the yield curve, with the 10-year             flat to yield
1.716 percent. On Friday, the 10-year yield touched its lowest
since June 2017 at 1.704 percent.
    Canada's inflation report for February and January retail
sales data are due on Friday.

 (Reporting by Fergal Smith
Editing by Susan Thomas)
  
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