December 6, 2018 / 9:21 PM / in 2 years

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

 (Adds dealer quote and details throughout; updates prices)
    * Loonie touches its lowest since June 12, 2017 at 1.3445
    * U.S. oil prices fall 2.7 percent in volatile trade as OPEC
    * Canada's 10-year yield touches its lowest in nearly one
    * Bank of Canada frets low oil prices 

    By Fergal Smith
    Dec 6 (Reuters) - The Canadian dollar fell to a nearly
18-month low against its U.S. counterpart on Thursday, as oil
and stock prices declined and investors slashed bets that the
Bank of Canada would raise interest rates as soon as January.
    Expectations for more interest rate hikes in Canada tumbled
after Bank of Canada Governor Stephen Poloz said the central
bank would need to assess the impact of lower oil prices and as
a new threat emerged to U.S.-China trade relations.             
    Chances of an interest rate hike at the central bank's next
meeting in January slumped to 10 percent from about 60 percent
before an interest announcement on Wednesday, when the central
bank left its benchmark interest rate on hold at 1.75 percent
and was more dovish than some investors expected.
    "The statement from the bank earlier this week was one of
the main factors pushing the Canadian dollar lower, on top of,
as you can imagine, the stock market weakness," said Simon Côté,
managing director, risk management solutions, National Bank
    Stocks fell as the arrest of a top Chinese technology
executive stirred fears of fresh tensions between the United
States and China over trade.                 
    Canada exports many commodities, including oil, so its
economy could be hurt if the global flow of trade or capital
    U.S. crude oil futures settled 2.7 percent lower at $51.49 a
barrel after major oil producers ended a meeting without
announcing a decision to cut crude output.             
    At 3:56 p.m. (2056 GMT), the Canadian dollar          was
trading 0.1 percent lower at 1.3371 to the greenback, or 74.79
U.S. cents. The currency hit its weakest intraday level since
June 12, 2017 at 1.3445.
    The decline for the loonie came as data showed that Canada's
trade deficit widened in October to C$1.17 billion. Separate
data showed that the pace of purchasing activity in Canada
expanded at a slower pace in November.                         
    Canada's employment report for November is due on Friday.
    The Canadian dollar will rally over the coming year if oil
prices recover and the Bank of Canada continues lifting interest
rates, according to a poll of currency strategists who have
become less bullish on prospects for the currency.             
    Canadian government bond prices were higher across the yield
curve, with the 10-year             rising 43 Canadian cents to
yield 2.084 percent. The 10-year yield touched its lowest
intraday since Dec. 28 at 2.026 percent.

 (Additional reporting by Saqib Iqbal Ahmed; Editing by
Bernadette Baum and Alistair Bell)
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