October 21, 2019 / 8:18 PM / 9 months ago

CANADA FX DEBT-Loonie rallies to 3-month high as Canadians vote in general election

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar rises 0.3% against the greenback
    * Loonie notches its strongest level since July 22
    * Easing of U.S.-China trade tensions supports CAD
    * Canadian bond prices fall across the yield curve

    By Fergal Smith
    Oct 21 (Reuters) - The Canadian dollar climbed to a near
three-month high against its U.S. counterpart on Monday as
investors became more optimistic on global trade and millions of
Canadians cast their ballots in the country's 43rd general
    The benchmark S&P 500 stock index rose within striking
distance of a record high as further signs of progress toward a
resolution of the trade dispute between the United States and
China helped boost shares in trade-exposed and economically
sensitive sectors.             
    "If the two trade situations, with Brexit and with the U.S.
and China, do get to an end point where they are positive for
global trade, that's automatically beneficial for the Canadian
dollar and the Canadian economy," said Michael Goshko, corporate
risk manager at Western Union Business Solutions.
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from reduced trade uncertainty.
    U.S. crude oil futures        settled 0.9% lower at $53.31 a
    The expectation that the Federal Reserve will later this
month lower its benchmark interest rate below the level of the
Bank of Canada's policy rate has added to support for the
loonie, Goshko said.
    On Oct. 30, investors expect the Fed to cut its overnight
lending rate by a quarter of a percentage point to a range of
1.50% to 1.75%. The same day, the Bank of Canada is seen leaving
its target for the overnight rate at 1.75%.                     
    At 3:49 p.m. (1949 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3082 to the greenback, or 76.44 U.S.
cents, its strongest level since July 22.
    The gain for the loonie came as Canadians voted to determine
whether Prime Minister Justin Trudeau will remain in power after
two major scandals.             
    Trudeau's Liberals and the main opposition Conservatives are
in a neck-and-neck race, according to opinion polls.
    "After some noise around the vote, we think FX players will
refocus attention  on  the  Bank of Canada policy outlook, the 
Fed and international backdrop pretty quickly," Shaun Osborne,
chief market strategist, at Scotiabank said in a note.
    The Bank of Canada will release on Tuesday the autumn issue
of the Business Outlook Survey, which could help guide
expectations for its policy outlook.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries, with the 10-year
            falling 15 Canadian cents to yield 1.561%.
    Last Thursday, the 10-year yield reached a three-month high
at 1.608%.

 (Additional reporting by Saqib Iqbal Ahmed; editing by Grant
McCool and Cynthia Osterman)
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