May 11, 2018 / 8:44 PM / 2 years ago

CANADA FX DEBT-C$ falls from 3-week high as jobs data clips rate hike bets

 (Adds strategist quotes and details on market activity; updates
    * Canadian dollar at C$1.2792, or 78.17 U.S. cents
    * Loonie touches three-week high at C$1.2730
    * Canadian jobs fall 1,100 in April
    * Bond prices higher across flatter yield curve

    By Fergal Smith
    TORONTO, May 11 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, with the currency
pulling back from an earlier three-week high after domestic jobs
data tempered expectations for a Bank of Canada interest rate
hike this month.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.2 percent lower at C$1.2792 to the greenback, or 78.17
U.S. cents.
    The loonie touched its strongest intraday since April 20 at
C$1.2730. For the week, it rose 0.4 percent.
    "The weak jobs data took a little steam out of the rally,"
said Rahim Madhavji, president at Knightsbridge Foreign
Exchange. "It leads to a lesser likelihood of a Bank of Canada
rate hike."        
    The decline of 1,100 jobs in April was well short of
economists' forecasts for an increase of 17,400. But full-time
jobs rose by nearly 29,000 and wage growth accelerated.
    Chances of an interest rate hike at the May 30 announcement
slipped to 42 percent from nearly 50 percent before the jobs
data, the overnight index swaps market indicated.           
    The price of oil, one of Canada's major exports, fell as it
looked likely that U.S. allies would push to maintain a deal
with Iran, which could keep that country's crude exports on
global markets.             
    U.S. crude        prices settled 0.9 percent lower at $70.70
a barrel.
    Still, the loonie is expected to strengthen over the coming
year as a clearer outlook for the North American Free Trade
Agreement opens the door to more Bank of Canada interest rate
hikes, a Reuters poll of currency strategists showed.
    Senior American, Canadian and Mexican officials ended a week
of talks without a deal to modernize NAFTA, agreeing instead to
resume negotiations soon.                 
    Speculators have cut bearish bets on the Canadian dollar,
data from the U.S. Commodity Futures Trading Commission and
Reuters calculations showed. As of May 8, net short positions
had fallen to 23,861 contracts, the smallest since March, from
27,535 a week earlier.
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 2 Canadian cents to
yield 1.967 percent and the 10-year             rising 17
Canadian cents to yield 2.377 percent.
    The 10-year yield had touched its highest intraday since May
2014 at 2.417 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Rosalba O'Brien)
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