December 5, 2018 / 4:19 PM / 2 years ago

CANADA FX DEBT-C$ hits 18-month low as investors slash rate hike bets

 (Adds economist quote and details throughout; updates prices)
    * Canadian dollar falls 0.8 percent against the greenback
    * Bank of Canada leaves policy rate on hold at 1.75 percent
    * Loonie hits its lowest since June 2017 at 1.3400
    * Canada's 10-year yield hits a 4-1/2-month low at 2.118
    * Price of U.S. oil rises 1.7 percent

    By Fergal Smith
    TORONTO, Dec 5 (Reuters) - The Canadian dollar weakened to
one-and-a-half-year low against its U.S. counterpart on
Wednesday as investors slashed expectations for further interest
rate hikes from the Bank of Canada after a dovish interest rate
announcement from the central bank.
    The Bank of Canada kept its benchmark interest rate on hold
at 1.75 percent, as expected, and said there might be more room
for non-inflationary growth, suggesting the pace of future hikes
could be more gradual.             
    "From where we were last time out, things are a little bit
more dovish in tone, and, not surprisingly we've seen the
Canadian dollar weaken in the wake of that," said Michael
Gregory, a senior economist at BMO Capital Markets.   
    Chances of a hike in January slumped from about 60 percent
before the data to 36 percent, the overnight index swaps market
    At 10:59 a.m. (1559 GMT), the Canadian dollar          was
trading 0.8 percent lower at 1.3377 to the greenback, or 74.76
U.S. cents. The currency touched its lowest since June 2017 at
    The decline for the loonie came as global stocks were
pressured by a renewal of worries about trade tensions and as
the U.S. dollar        strengthened against a basket of major
    The price of oil, one of Canada's major exports, rose ahead
of a meeting of the world's biggest exporters who will discuss
cutting output to help shore up prices and curb excess supply.
    U.S. crude        prices were up 1.7 percent at $54.15 a
    Two major pipelines carrying oil from Canada to the United
States were hit by weather-related disruptions on Tuesday, the
latest hit to Canada's oil industry just days after the Alberta
government announced forced cuts in crude production.
    Canadian government bond prices were higher across the yield
curve, with the two-year            price up 13 Canadian cents
to yield 2.048 percent and the 10-year             rising 38
Canadian cents to yield 2.126 percent.
    The 10-year yield hit its lowest intraday since July 19 at
2.118 percent.     
    U.S. markets were closed on Wednesday to honor former U.S.
President George H.W. Bush, who died last Friday.             

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
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