May 10, 2019 / 8:35 PM / a year ago

CANADA FX DEBT-Loonie notches 9-day high as jobs surge clips rate cut bets

 (Adds economist quote and details on activity; updates prices)
    * Canadian dollar rises 0.5% against the greenback
    * Loonie touches its strongest since May 1 at 1.3381
    * Canada adds 106,500 jobs in April
    * Chances of a BoC rate cut this year fall to less than 30%

    By Fergal Smith
    TORONTO, May 10 (Reuters) - The Canadian dollar strengthened
to a nine-day high against its U.S. counterpart on Friday, as
investors slashed bets for an interest rate cut this year from
the Bank of Canada after domestic data showing a record jobs
    The Canadian economy added 106,500 jobs in April, the
biggest monthly gain on record, led by employment increases in
the two most populous provinces, Ontario and Quebec, Statistics
Canada data showed. That far outstripped analysts' expectations
of 10,000 jobs.             
    "It certainly will allay rate-cut chatter and it certainly
keeps the door open for a possible rate increase later this year
if the economy ticks up in the spring and summer as the Bank of
Canada anticipates," said Sal Guatieri, a senior economist at
BMO Capital Markets.
    Chances of an interest rate cut by December fell to less
than 30% from about 40% before the jobs report, the overnight
index swaps market indicated.           
    At 4:06 p.m. (2006 GMT), the Canadian dollar          was
trading 0.5% higher at 1.3414 to the greenback, or 74.55 U.S.
cents. The currency touched its strongest level since May 1 at
    For the week, the loonie was nearly flat as a trade dispute
escalated between the United States and China.
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of capital or trade.
    U.S. crude oil futures        settled 4 cents lower at
$61.66 a barrel.                 
    Separate domestic data showed the value of Canadian building
permits rose 2.1% in March, driven higher by construction plans
in the four Western provinces, after falling a revised 5.1% in
    Speculators cut their bearish bets on the Canadian dollar
for the third straight week, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed. As
of May 7, net short positions had fallen to 46,115 contracts
from 46,745 in the prior week.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 12 Canadian cents to
yield 1.646% and the 10-year             falling 50 Canadian
cents to yield 1.733%.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed 5.5 basis points to a spread of 62.9 basis
points in favor of the U.S. bond, its narrowest since Jan. 16.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Jonathan Oatis)
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