July 22, 2020 / 2:02 PM / in 23 days

CANADA FX DEBT-C$ holds gains vs U.S. dollar after data shows jump in inflation

    * Canadian dollar at C$1.344 or 74.40 U.S. cents
    * Bond prices rise across the maturity curve

    By Saqib Iqbal Ahmed
    July 22 (Reuters) - The Canadian dollar clung to slim gains
against its U.S. counterpart on Wednesday, after data showed
Canada's annual inflation rate in June posted its biggest
acceleration in more than nine years.
    Canada's annual inflation rate in June spiked as
restrictions imposed to curb the coronavirus outbreak were
lifted, Statistics Canada said on Wednesday.             
    June marked the end of two months of deflation. The Bank of
Canada - which says interest rates will remain near record lows
for another two years - predicts inflation will remain weak in
the near term.             
    The Canadian dollar        was at C$1.344 to the greenback,
or 74.40 U.S. cents, stronger than Tuesday's close of C$1.3456,
or 74.32 U.S. cents.    
    "In terms of the Bank of Canada, I don’t think it has a lot
of bearing on what the central bank plans on doing with policy,"
Royce Mendes, senior economist at CIBC Capital Markets, said.
    "The key to remember here is the bank is trying to get a
sense of the underlying pace of inflation. So this one month
move, while large in isolation, probably won’t change their view
of the economy and how much inflation it’s likely to be able to
generate," said Mendes.
    The loonie, which has been in a narrow range against the
greenback for the last seven weeks, was on pace for its third
straight day of gains against the greenback and is at a near
six-week high.
    The Canadian dollar has benefited from the recent recovery
in the price of oil, one of Canada's major exports, and a broad
weakness in the U.S. dollar.
    On Wednesday, Canadian government bond prices rose across
the  maturity curve. The two-year            yield was at 0.267%
down from 0.272% late on Tuesday, while the benchmark Canadian
10-year             yield slipped to 0.506% from Monday's
0.518%.

 (Reporting by Saqib Iqbal Ahmed in New York; Additional
reporting by Allison Lampert in Montreal; editing by Jonathan
Oatis)
  
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