October 16, 2018 / 8:49 PM / in 2 months

CANADA FX DEBT-C$ strengthens to 11-day high as stocks rally

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar rises 0.4 percent against greenback
    * Loonie touches strongest level since Oct. 5
    * Canadian bond prices trade mixed across yield curve
    * Foreign investment in Canadian securities slows in August

    By Fergal Smith
    TORONTO, Oct 16 (Reuters) - The Canadian dollar strengthened
to an 11-day high against the greenback on Tuesday, boosted by a
rise in stocks and growing expectations of a Bank of Canada
interest rate hike next week.
    Stocks gained as upbeat earnings reports helped ease jitters
over the impact of various global issues, including tariffs, on
corporate profits.             
    "The big story in markets is that sentiment has turned,"
said Adam Button, a currency analyst at ForexLive. "The Canadian
dollar is a pro-growth currency and the fears about emerging
markets and interest rates have completely dissipated for the
moment."
    Canadian business optimism remained at near-record levels in
the third quarter as companies reported rising pressure on
capacity, labor and prices amid signs of stronger sales, the
Bank of Canada said on Monday.                 
    The central bank has raised rates four times since July
2017. Its policy rate is currently 1.50 percent.    
    Chances of another rate hike at the Oct. 24 announcement
have climbed to more than 90 percent. They were less than 80
percent before a deal to revamp the North American Free Trade
Agreement was struck at the end of September.
    "The money that is going into the Canadian dollar right now
is expecting a hawkish Bank of Canada next week," Button said.
    At 4:22 p.m. (2022 GMT), the Canadian dollar          was
trading 0.4 percent higher at 1.2940 to the greenback, or 77.28
U.S. cents. The currency touched its strongest level since Oct.
5 at 1.2915.
    The price of oil, one of Canada's major exports, was
supported by worries that crude supply from the Middle East
could be disrupted by looming U.S. sanctions on Iran and growing
tensions with top exporter Saudi Arabia.             
    U.S. crude oil futures        settled 0.2 percent higher at
$71.92 a barrel.     
    Foreign investors bought a net C$2.82 billion in Canadian
securities in August, following a revised C$15.29 billion total
purchase in July, Statistics Canada said. It was the lowest
monthly investment since the beginning of the year.             
    Canadian government bond prices were mixed across the yield
curve, with the 10-year             rising 4 Canadian cents to
yield 2.497 percent.
    Earlier this month, the 10-year yield touched its highest
level in nearly five years at 2.615 percent.

 (Reporting by Fergal Smith; 
Editing by Sandra Maler)
  
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