August 23, 2018 / 7:48 PM / 3 months ago

CANADA FX DEBT-C$ slides as investors brace for Fed's Powell

 (Adds strategist quotes, new throughout)
    * Canadian dollar at C$1.3085, or 76.42 U.S. cents
    * Loonie falls 0.6 percent
    * Bond prices lower across flatter yield curve
    * Gap between 2- and 10-year yields hits narrowest in 11
years

    By Fergal Smith
    TORONTO, Aug 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, pulling back from a
two-week high the day before, as the greenback rose broadly
ahead of a speech on Friday by Federal Reserve Chairman Jerome
Powell.
    The U.S. dollar snapped a five-day losing streak, as a new
round of U.S.-Chinese punitive trade tariffs boosted the
greenback and the annual Federal Reserve conference began in
Jackson Hole, Wyoming.             
    Powell is due to speak at the economic symposium on Friday.
U.S. President Donald Trump told Reuters on Monday that he was
"not thrilled" with rate increases under Powell, so the Fed
chairman may wish to show he will not bow to pressure, said
Shaun Osborne, chief currency strategist at Scotiabank.
    "The (U.S.) dollar is generally strengthening up a bit more
running into the Powell comments tomorrow," Osborne said. "There
is an expectation that he can't sound in any way shape or form
dovish."
    At 3:14 p.m. (1914 GMT), the Canadian dollar          was
trading 0.6 percent lower at C$1.3085 to the greenback, or 76.42
U.S. cents. The currency traded in a range of C$1.2994 to
C$1.3099.
    On Wednesday, the loonie touched its strongest level in two
weeks at C$1.2987 as oil prices jumped and optimism grew about
progress in negotiations on the North American Free Trade
Agreement.
    Canada's foreign minister said on Thursday that Canada would
need to agree to any final conclusion on "rules of origin"
reached in bilateral talks between the United States and Mexico
as part of the modernization of NAFTA.                 
    The price of oil, one of Canada's major exports, steadied as
the escalating trade war between the United States and China
weighed on demand expectations a day after prices jumped on a
big draw in U.S. crude inventories.             
    U.S. crude oil futures        settled three cents lower at
$67.83 a barrel.
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 2.5 Canadian
cents to yield 2.125 percent and the benchmark 10-year
            falling 1 Canadian cent to yield 2.259 percent.
    The gap between the two-year and 10-year yields shrank by
1.4 basis points to a spread of 13.4 basis points, its narrowest
since October 2007.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Peter
Cooney)
  
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