June 10, 2020 / 8:32 PM / a month ago

CANADA FX DEBT-Canadian dollar posts 3-month high as Fed promises economic support

    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches its strongest since March 4 at 1.3315 
    * Price of U.S. oil increases 1.7%
    * Canadian bond yields fall across a flatter curve

    By Fergal Smith
    TORONTO, June 10 (Reuters) - The Canadian dollar
strengthened to a three-month high against its U.S. counterpart
on Wednesday as investors bet that a lengthy period of loose
monetary policy from the Federal Reserve could be supportive of
commodity-linked currencies.
    Fed policymakers projected a 6.5% decline in gross domestic
product this year and a 9.3% unemployment rate at year's end,
while they see the key overnight interest rate remaining near
zero this year and next.             
    "That suggests that monetary policy conditions are going to
remain easy on a global basis and that is positive for high beta
currencies like the Canadian dollar," said Karl Schamotta, chief
market strategist at Cambridge Global Payments.
    Beta is a measure of a financial asset's volatility compared
to the market. Canada is a major exporter of commodities,
including oil, so the loonie tends to be sensitive to the
outlook for the global economy.
    U.S. crude oil futures        settled 1.7% higher at $39.60
a barrel even as U.S. data showed crude inventories rose to a
record high, reviving worries of a persistent glut due to weak
demand.             
    The Canadian dollar        was up 0.2% at 1.3391 to the
greenback, or 74.68 U.S. cents. The currency touched its
strongest intraday level since March 4 at 1.3315 but gave up
much of its gains as stocks on Wall Street lost ground in
volatile trade.                 
    Canada and the United States are set to extend a ban on
non-essential travel to late July as both countries seek to
control the spread of the coronavirus, according to three
sources familiar with the matter. The ban, currently due to
expire on June 21, does not affect trade.                 
    Canadian government bond yields moved lower across a flatter
curve in sympathy with U.S. Treasuries, with the 10-year
            down 7.1 basis points at 0.563%. 

 (Reporting by Fergal Smith; editing by Jonathan Oatis and
Marguerita Choy)
  
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