April 24, 2019 / 3:06 PM / 5 months ago

CANADA FX DEBT-C$ hits 4-month low as Bank of Canada rate cut bets climb

 (New throughout, updates prices and market activity, adds
details and comment from strategist)
    * Canadian dollar falls 0.6% against the greenback
    * Loonie touches its weakest since Jan. 3 at 1.3522
    * Price of U.S. oil falls 0.4%
    * Canada-U.S. 10-year spread posts widest in nearly one
month

    By Fergal Smith
    TORONTO, April 24 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday to its lowest in
nearly four months, as investors raised bets on a Bank of Canada
interest rate cut this year after the central bank slashed its
economic growth outlook.
    Canada's central bank held its benchmark interest rates
steady at 1.75% as expected but removed wording about the need
for future rate hikes and lowered its growth forecast for 2019
to 1.2% from 1.7%.             
    "They brought more of the weakness on board than we expected
them to." said Andrew Kelvin, senior rates strategist at TD
Securities.
    The Bank of Canada has raised rates by 125 basis points
since July 2017. But the Canadian economy has taken a hit from
the province of Alberta's mandatory production cut of oil - its
biggest export - a slowdown in the housing market and wilting
business sentiment over worries surrounding the U.S.-China trade
war.
    Chances of an interest rate cut by December rose to nearly
70% from 57% before the policy announcement, data from the
overnight index swaps market showed.           
    Bank of Canada Governor Stephen Poloz and Senior Deputy
Governor Carolyn Wilkins are due to hold a press conference at
11:15 ET (1515 GMT).
    Meanwhile, the U.S. dollar        rose to a 22-month high as
souring confidence measures in the euro zone weighed on the
euro.             
    At 10:36 a.m. (1436 GMT), the Canadian dollar          was
trading 0.6% lower at 1.3499 to the greenback, or 74.08 U.S.
cents. The currency touched its weakest intraday level since
Jan. 3 at 1.3522.
    The price of oil, one of Canada's major exports, pulled back
from a six-month high as data showing rising U.S. stocks
countered fears of tight supply resulting from OPEC output cuts
and U.S. sanctions on Venezuela and Iran.             
    U.S. crude        prices were down 0.4% at $66.06 a barrel .
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 12.5 Canadian cents to
yield 1.506%, its lowest since March 29, and the 10-year
            rising 78 Canadian cents to yield 1.668%.
    The 10-year yield fell 3.4 basis points further below the
yield on the equivalent U.S. bond to a spread of -85.4 basis
points, its widest since March 25.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and David
Gregorio)
  
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