February 6, 2020 / 9:36 PM / 16 days ago

CANADA FX DEBT-Canadian dollar slips to two-month low ahead of key jobs report

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar weakens 0.1% against the greenback
    * Loonie hits a two-month low at 1.3309
    * Price of U.S. oil increases 0.6%
    * Canada's 10-year yield eases 2 basis points to 1.369%

    By Fergal Smith
    TORONTO, Feb 6 (Reuters) - The Canadian dollar weakened on
Thursday to a two-month low against its broadly higher U.S.
counterpart, but the loonie pared some losses as investors
awaited jobs data that could help guide Bank of Canada interest
rate expectations.
    At 4:06 p.m. (2106 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3290 to the greenback, or 75.24 U.S.
cents. The currency touched its weakest intraday level since
Dec. 3 at 1.3309.    
    "We are in wait-and-see mode for the U.S. and Candian jobs
reports tomorrow," said Erik Nelson, a currency strategist, at
Wells Fargo.
    While the Bank of Canada will take Friday's jobs data into
account, after solid employment gains last year a weak number
would be unlikely by itself to trigger an interest rate cut,
Nelson said.
    In 2019, employment increased by 1.7% but all the job gains
were in the first three quarters of the year. Last month, the
Bank of Canada opened the door to an interest rate cut should
recent weakness in the domestic economy persist.             
    Money markets expect the central bank to stay on hold at its
next interest rate decision on March 4 but see about an 80%
chance of a cut by the summer.               
    The loonie will climb over the coming year, recouping much
of its recent decline, as the economic threat from the
coronavirus outbreak in China likely fades, and some analysts do
not expect the Bank of Canada to cut interest rates in 2020, a
Reuters poll of analysts showed.                 
    The price of oil, one of Canada's major exports, was close
to flat on Thursday as OPEC and its partner Russia gave mixed
signals about possible further output cuts to mitigate the
impact of any weakening in global demand due to the coronavirus
outbreak. U.S. crude oil futures        were up 0.6% at $51.04 a
barrel, while global benchmark Brent crude dipped.             
   The U.S. dollar        rose against a basket of major
currencies, bolstered by recent strong U.S. economic numbers,
while stocks          globally were boosted by China's plan to
chop additional tariffs on some American goods by 50%.
             
    Canadian government bond yields were lower across a flatter
yield curve. The 10-year yield             eased 2 basis points
to 1.369%, after earlier in the day touching its highest level
since Jan. 24 at 1.403%.

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