January 8, 2019 / 9:48 PM / 2 months ago

CANADA FX DEBT-C$ notches one-month high as investors bet on trade deal

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar rises 0.2 percent against the greenback
    * Loonie touches its strongest intraday since Dec. 7 at
1.3268
    * Price of U.S. oil rises 2.6 percent
    * Bond prices trade lower across the yield curve
    * Canada-U.S. 2-year spread widens by 5 basis points

    By Fergal Smith
    TORONTO, Jan 8 (Reuters) - The Canadian dollar strengthened
to a one-month high against the greenback on Tuesday as hopes of
a trade deal between the United States and China boosted
investor sentiment ahead of an interest rate decision from the
Bank of Canada.    
    Stocks and the price of oil rallied on bets the world's two
largest economies would strike a deal to end a trade war. U.S.
crude oil futures        settled 2.6 percent higher at $49.78 a
barrel.                             
    Canada exports many commodities, including oil, so its
economy could benefit from an improved outlook for global trade.
    "CAD is looking a bit better overall at this point and it
can perhaps improve a little bit more," said Shaun Osborne,
chief currency strategist at Scotiabank.
    The Bank of Canada, which hiked interest rates three times
in 2018 to leave its benchmark rate at 1.75 percent, is expected
to refrain from tightening further on Wednesday after it worried
last month that a sharp drop in oil prices since October could
hurt Canada's economy.
    Data on Tuesday from Statistics Canada showed that the
country's trade deficit more than doubled in November to C$2.06
billion as exports declined for a fourth straight month, dragged
down by weak prices for crude oil and lower demand for
chemicals.             .
    At 4:34 p.m. (2134 GMT), the Canadian dollar          was
trading 0.2 percent higher at 1.3276 to the greenback, or 75.32
U.S. cents. The currency touched its strongest intraday level
since Dec. 7 at 1.3268.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 2.5 Canadian cents to
yield 1.9 percent and the 10-year             falling 9 Canadian
cents to yield 1.967 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 5 basis points to a spread of 68.8 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith
Editing by Tom Brown)
  
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