July 5, 2019 / 7:31 PM / 3 months ago

CANADA FX DEBT-C$ pulls back from 8-month high as investors reweigh Fed outlook

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar weakens 0.2% against the greenback
    * Canada's economy sheds 2,200 jobs in June
    * Price of U.S. oil increases 0.3%
    * Canadian bond prices decline across the yield curve

    By Fergal Smith
    TORONTO, July 5 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, pulling back from an
eight-month high the day before, as the greenback broadly
climbed and after data showed a surprise drop in Canadian jobs
in June.
    The U.S. dollar        gained against a basket of currencies
after an unexpectedly strong U.S. payrolls report that caused
investors to rethink how dovish a turn the Federal Reserve may
take.
    "It's a 'big dollar' story," said Greg Anderson, global head
of foreign exchange strategy at BMO Capital Markets in New York.
"The dollar has gained against everything, and the least against
CAD."
    Other than the U.S. dollar, the loonie was the best
performing G10 currency.
     Canada's economy shed a net 2,200 jobs in June after two
months of gains, but wages jumped by the most in more than a
year - a sign of strength analysts said ruled out the chances of
the Bank of Canada cutting interest rates next week.
            
    "The headline number was a little weak but all the details
were good," Anderson said.     
    Chances that the central bank would cut rates this year
slipped to about 15% from 25% before the jobs report, the
overnight index swaps market indicated.           
    In separate domestic data, the seasonally adjusted Ivey
Purchasing Managers Index fell to its lowest since February at
52.4 from 55.9 in May.             
    At 3:15 p.m. (1915 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3081 to the greenback, or 76.45 U.S.
cents. The currency, which on Thursday notched an eight-month
high at 1.3038, traded in a range of 1.3045 to 1.3136.
    For the week, the loonie was nearly unchanged.
    The Canadian dollar will edge higher against the greenback
over the coming year, as a recovering domestic economy
forestalls Bank of Canada interest rate cuts despite expected
easing from the U.S. Federal Reserve, a Reuters poll predicted.
                
    The price of oil, one of Canada's major exports, was
supported on Friday by tensions over Iran and a decision by OPEC
and its allies to extend an output supply cut deal until next
year. U.S. crude oil futures        settled 0.3% higher at
$57.51 a barrel.             
    Canadian government bond prices were sharply lower across
the yield curve in sympathy with U.S. Treasuries. The two-year
           fell 18.5 Canadian cents to yield 1.623% and the
10-year             was down 101 Canadian cents to yield 1.576%.
    The 10-year yield touched its highest intraday since May 30
at 1.582%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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