December 11, 2019 / 9:27 PM / 4 months ago

CANADA FX DEBT-Loonie rallies as Fed low rate commitment boosts growth outlook

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar rises 0.5% against the greenback
    * Canada's third-quarter industrial capacity use falls to
81.7%
    * Price of U.S. oil decreases by 0.8%
    * Canadian bond prices trade rise across a flatter yield
curve

    By Fergal Smith
    TORONTO, Dec 11 (Reuters) - The Canadian dollar rallied
against its broadly weaker U.S. counterpart on Wednesday as the
Federal Reserve signaled no intention to raise interest rates
over the next year, bolstering the outlook for the global
economy.
    The U.S. central bank left the benchmark overnight lending
rate in its current, historically low, target range between
1.50% and 1.75%. A solid majority of 13 of 17 Fed policymakers
foresee no change in interest rates until at least 2021.
            
    "The Fed cemented the idea that U.S. rates will not go
higher," said Adam Button, chief currency analyst at ForexLive.
"That is a great sign for global growth and the Canadian dollar
is among the more risk sensitive currencies."
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from an improved outlook for global
growth.
    U.S. crude oil futures        pared earlier losses to settle
0.8% lower at $58.76 a barrel, while Wall Street rallied and the
U.S. dollar declined against a basket of major currencies.
                                    
    At 3:49 p.m. (2049 GMT), the Canadian dollar          was
trading 0.5% higher at 1.3169 to the greenback, or 75.94 U.S.
cents. The currency touched 1.3163, its strongest intraday level
since data on Friday showed Canada's economy shed more than
70,000 jobs in November.             
    Gains for the loonie were restrained by the potential for
Bank of Canada Governor Stephen Poloz, who is due to speak on
Thursday, to react dovishly to the jobs data, Button said.  
    Poloz's speech will be the first since the Bank of Canada
said he would step down when his seven-year mandate expires in
June.              Last week, the central bank left its
benchmark interest rate unchanged at 1.75% as it pointed to
early signs the global economy was stabilizing.        
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 2 Canadian cents to yield 1.658% and the 10-year
            was up 18 Canadian cents to yield 1.580%.
    Canadian industries ran at 81.7% of capacity in the third
quarter of 2019, down from 83.3% in the second quarter,
Statistics Canada said. Economists had forecast a rate of 82.1%.
            

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Tom
Brown)
  
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