July 9, 2019 / 8:57 PM / 4 months ago

CANADA FX DEBT-Loonie hits one-week low on risk of dovish shift by BoC

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.2% against the greenback
    * Canadian housing starts surge in June
    * Price of U.S. oil increases 0.3%
    * Canada's 10-year yield touches a five-week high at 1.594%

    By Fergal Smith
    TORONTO, July 9 (Reuters) - The Canadian dollar weakened to
an eight-day low against its U.S. counterpart on Tuesday as the
greenback broadly climbed and investors saw potential for the
Bank of Canada to try to slow the currency's recent rally.
    The loonie has been the top-performing G10 currency this
year as Canada's economy showed signs of picking up in recent
months and traders bet that Bank of Canada Governor Stephen
Poloz would cut interest rates at a slower pace than the Federal
Reserve.
    "There could still be some trade-related threats for Canada
and on that basis he (Poloz) may just want to cool down the
market," said Amo Sahota, a director at Klarity FX in San
Francisco.
    A stronger loonie could make Canada's exports less
competitive, hurting the country's economy.
    The U.S. dollar        gained against a basket of major
currencies as investors reassessed their expectations of how
much the Fed may cut interest rates this month. Fed Chief Jerome
Powell is due to testify before Congress on Wednesday.
                
    The price of oil, one of Canada's major exports, was
supported by Middle East tensions and OPEC supply cuts. U.S.
crude oil futures        settled 0.3% higher at $57.83 a barrel.
            
    At 4:14 p.m. (2014 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3129 to the greenback, or 76.17 U.S.
cents. The currency touched its weakest intraday level since
July 1 at 1.3141.
    Speculators have turned bullish on the Canadian dollar for
the first time since March 2018, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed on
Monday. As of July 2, there were 6,293 contracts net long the
loonie, a swing from 14,790 contracts net short the currency in
the prior week.                                 
    Canadian housing starts rose much more than expected in
June, to a seasonally adjusted annualized rate of 245,657 units,
the Canadian Mortgage and Housing Corp (CMHC) said.             
    Separate data from Statistics Canada showed that the value
of building permits fell by 13% in May from April, largely due
to the value of permits in British Columbia returning to recent
levels following a surge in April.             
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year            up 6 Canadian cents to
yield 1.640% and the 10-year             rising 1 Canadian cent
to yield 1.579%.
    The 10-year yield touched its highest intraday since May 30
at 1.594%.

 (Reporting by Fergal Smith; Additional reporting by Levent
Uslu; Editing by Peter Cooney)
  
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