June 26, 2019 / 7:21 PM / 21 days ago

CANADA FX DEBT-C$ rises to 5-month high as investors brace for U.S. rate cuts

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.4% against the greenback
    * Loonie notches its strongest since Feb. 5 at 1.3108
    * Price of U.S. oil increases 2.7%
    * Canada's 10-year yield touches a 2-week high at 1.499%

    By Fergal Smith
    TORONTO, June 26 (Reuters) - The Canadian dollar
strengthened to a near five-month high against its U.S.
counterpart on Wednesday as oil prices climbed and investors
adjusted to the prospect of interest rate cuts by the Federal
Reserve.
    The U.S. central bank signaled last Wednesday that it could
ease interest rates as early as July due to growing risks to the
U.S. economy, especially related to the trade war between
Washington and Beijing. 
    "I think the market is still reeling from last week's big
Fed move," said Erik Bregar, head of FX strategy at the Exchange
Bank of Canada.
    The Bank of Canada has also worried about trade conflicts.
Money markets see about a 50% chance of a rate cut this year by
the central bank, but that is much less easing than expected
from the Fed.           
    Adding to support for the loonie, the price of oil, one of
Canada's major exports, was buoyed by U.S. government data that
showed a larger-than-expected drawdown in crude stocks. U.S.
crude oil futures        settled 2.7% higher at $59.38 a barrel.
                
    At 2:44 p.m. (1844 GMT), the Canadian dollar          was
trading 0.4% higher at 1.3118 to the greenback, or 76.23 U.S.
cents. The currency touched its strongest intraday level since
Feb. 5 at 1.3108.
    The loonie rose despite Beijing on Tuesday halting beef and
pork imports from Canada, citing falsified paperwork. Unknown
actors are using bogus certificates to smuggle Canadian meat
into China, Trade Minister Jim Carr said on Wednesday.
            
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The two-year           
fell 9.5 Canadian cents to yield 1.454% and the 10-year
            declined 59 Canadian cents to yield 1.497%.
    The 10-year yield touched its highest intraday since June 12
at 1.499%.
    Canadian gross domestic product data for April is due for
release on Friday.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Susan Thomas)
  
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