December 5, 2018 / 8:54 PM / 2 years ago

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

 (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 falls 0.7 percent

    By Fergal Smith
    TORONTO, Dec 5 (Reuters) - The Canadian dollar weakened to a
1-1/2 year low against the greenback on Wednesday as investors
slashed expectations for further interest rate hikes from the
Bank of Canada after a dovish announcement from the central
    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 35 percent, the overnight index swaps market
    At 3:39 p.m. (2039 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 weakest since June 2017 at
    The loonie weakened as global stocks were pressured by
renewed worries about trade tensions and as the U.S. dollar
       strengthened against a basket of major currencies.
    The price of oil, one of Canada's major exports, weakened
ahead of a meeting of the world's biggest exporters which will
discuss cutting output to help shore up prices and curb excess
    U.S. crude oil futures        settled 0.7 percent lower at
$52.89 a barrel.
    Alberta's decision to mandate output cuts to reduce a glut
will hurt North American producers of lighter oil used for
blending and U.S. refiners importing crude via rail, even as
several major Canadian energy companies cheered the move.
    Canadian government bond prices rose across the yield curve,
with the two-year            up 12.5 Canadian cents to yield
2.051 percent and the 10-year             rising 43 Canadian
cents to yield 2.120 percent.
    The 10-year yield hit its lowest intraday level 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 Richard Chang)
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