February 4, 2020 / 8:25 PM / in 4 months

CANADA FX DEBT-Canadian dollar holds near 2-month low as oil prices fall

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar trades near flat against the greenback
    * Loonie trades in a range of 1.3264 to 1.3301 
    * Price of U.S. oil decreases 0.6%
    * Canadian bond yields rise across a steeper yield curve

    By Fergal Smith
    TORONTO, Feb 4 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Tuesday, with the loonie
hovering near a two-month low it hit the previous day as concern
lingered that China's coronavirus outbreak would hurt demand for
commodities.
    The price of oil, one of Canada's major exports, fell as
fears that energy demand would take a long-term hit from the
outbreak offset prospects for more cuts in crude production from
OPEC and its allies. U.S. crude oil futures        were down
0.6% at 49.80 a barrel.             
    "The underlying environment is still quite fragile," said
Shaun Osborne, chief currency strategist at Scotiabank. "Within
the next week or so we should get a better sense of whether this
is going to be contained."
    Stocks          rallied globally after the People's Bank of
China injected liquidity into money markets             
    At 2:54 p.m. (1954 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3283 to the greenback, or 75.28
U.S. cents. The currency, which hit a two-month low on Monday at
1.3302, traded in a range of 1.3264 to 1.3301.    
    Trade confidence among Canadian exporters fell to its lowest
level in nearly a decade, Canada's export credit agency said, as
businesses wrestle with protectionist policies and fret about
the global economy.             
    Canadian trade data for December is due on Wednesday and the
January jobs report is awaited on Friday, both of which could
guide expectations for the Bank of Canada interest rate outlook.
    Last month, the Canadian central bank left the door open to
an interest rate cut should a recent slowdown in domestic growth
persist. Money markets see about a 60% chance that it will ease
by April.               
    Canadian government bond yields rose across a steeper yield
curve, with the 10-year yield             rising 8 basis points
to 1.338%. On Monday, it hit its lowest intraday level in nearly
four months at 1.252%.      
    Canada's Federal Court of Appeal dismissed a challenge to
the approval by Prime Minister Justin Trudeau's government of
the Trans Mountain oil pipeline expansion, clearing some
uncertainty from the project.                           

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Diane
Craft)
  
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