January 19, 2017 / 2:40 PM / 10 months ago

CANADA FX DEBT-C$ hits 2-week low as greenback climbs

* Canadian dollar at C$1.3295, or 75.22 U.S. cents
    * Loonie touches its weakest since Jan. 4 at C$1.3324
    * Bond prices lower across a steeper yield curve

    TORONTO, Jan 19 (Reuters) - The Canadian dollar weakened to
a two-week low against its U.S. counterpart on Thursday, one day
after the Bank of Canada left the door open to cutting interest
rates, as broader gains for the greenback offset higher oil
prices and firm domestic data.
    Canadian manufacturing sales rebounded 1.5 percent in
November from October on gains in the primary metal, petroleum
and coal industries, Statistics Canada said. Analysts polled by
Reuters had expected a 1.0 percent rise. 
    Prices of oil, one of Canada's major exports, recovered from
a one-week low as the International Energy Agency said oil
markets were tightening even before cuts agreed by OPEC and
other producers took effect.
    U.S. crude prices were up 0.92 percent at $51.55 a
barrel. 
    The U.S. dollar rose against a basket of currencies
as European Central Bank President Mario Draghi played down a
recent rise in euro zone inflation. Gains for the greenback came
after Federal Reserve Chair Janet Yellen signaled on Wednesday a
path of steady U.S. interest rate increases.
  
    At 9:18 a.m. ET (1418 GMT), the Canadian dollar was
trading at C$1.3295 to the greenback, or 75.22 U.S. cents,
weaker than Wednesday's close of C$1.3259, or 75.42 U.S. cents.
    The currency's strongest level of the session was C$1.3253,
while it touched its weakest since Jan. 4 at C$1.3324.
    On Wednesday, the Bank of Canada left its policy rate on
hold at 0.5 percent. The central bank warned that a rate cut
remains on the table if the risks facing the country are
realized, warning there would be "material consequences" if U.S.
President-elect Donald Trump enacts protectionist policies.
    Trump's choice for commerce secretary, Wilbur Ross, said on
Wednesday that renegotiating the North American Free Trade
agreement with Mexico and Canada would likely be the Trump
administration's first priority. 
    Canada sends 75 percent of its exports to the United States.
    In separate domestic data, foreign investment in Canadian
securities dropped to an 11-month low in November, with
non-residents buying a net C$7.24 billion worth of bonds, stocks
and money market paper, Statistics Canada said. 
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year falling 2.5 Canadian
cents to yield 0.784 percent and the 10-year 
declining 25 Canadian cents to yield 1.737 percent.
    The 10-year yield fell 4.3 basis points further below its
U.S. equivalent to a spread of -72.3 basis points, as U.S.
Treasuries underperformed.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)

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