July 15, 2020 / 3:11 PM / 25 days ago

CANADA FX DEBT-Canadian dollar strengthens as vaccine hopes boost global stocks

 (Adds economist quote and details throughout; updates prices)
    * Canadian dollar gains 0.5% against the greenback
    * Bank of Canada holds benchmark interest rate at 0.25%
    * Canadian manufacturing sales rise 10.7% in May
    * Canada-U.S. 10-year spread widens by 1.7 basis points

    By Fergal Smith
    TORONTO, July 15 (Reuters) - The Canadian dollar rose
against the greenback on Wednesday as investors grew more
optimistic about a COVID-19 vaccine and after the Bank of Canada
reinforced its commitment to support economic recovery.    
    Canada's economic growth will not return to pre-pandemic
levels until 2022, the Bank of Canada said, in an outlook that
was cautious on U.S. growth. It left its benchmark interest rate
at 0.25%, a level it considers to be the floor, and said it
would remain at that level until economic slack is absorbed.
            
    "The BoC remains all-in in terms of its commitment to
stimulus in order to support the recovery of the economy," said
Ryan Brecht, a senior economist at Action Economics.
    World shares          climbed toward a four-month high after
U.S. researchers reported that Moderna Inc's         
experimental vaccine for COVID-19 showed it was safe in an
ongoing early-stage study.                          
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so the loonie tends to
be sensitive to the global flow of trade and capital.
    U.S. crude        prices were up 1% at $40.70 a barrel after
a sharp drop in U.S. crude inventories.                 
    The Canadian dollar        was trading 0.5% higher at 1.3546
to the greenback, or 73.82 U.S. cents. The currency, which on
Tuesday touched its weakest intraday level since June 30 at
1.3646, traded in a range of 1.3543 to 1.3617.    
    Canadian factory sales jumped by a record 10.7% in May from
April as many manufacturers resumed operations following partial
shutdowns related to the coronavirus outbreak, Statistics Canada
said. Analysts in a Reuters poll had forecast a gain of 9.5% in
May.                 
    Canada's 10-year             was nearly unchanged at 0.537%,
while it traded 1.7 basis points further below the U.S. 10-year
yield for a spread of 9.5 basis points.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Steve Orlofsky)
  
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