April 2, 2019 / 7:51 PM / 8 months ago

CANADA FX DEBT-C$ retreats from 11-day high as Vancouver home sales slump

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    * Canadian dollar falls 0.3% against the greenback
    * Vancouver home sales decline 31.4% year-over-year in March
    * Price of U.S. oil gains 1.6%
    * Canadian bond prices rise across the yield curve
    * Canada's 10-year yield dips below the rate on the 3-month
T-bill

    By Fergal Smith
    TORONTO, April 2 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday, pulling back from an
11-day high the previous day as weak housing data from one of
Canada's major cities pointed to the economy's susceptibility to
higher interest rates.
    Vancouver home sales slumped 31.4% in March on an annual
basis to hit the lowest for the month in more than three
decades, the Real Estate Board of Greater Vancouver said.
    "Today's movement (in the Canadian dollar) is really just a
reaction to the really soft residential real estate numbers from
Vancouver," said Scott Lampard, head of global markets at HSBC
Bank Canada.
    "The interest rate sensitivity of the Canadian economy
because of the debt load that has been layered on ... is
probably higher than people had thought it was before, at which
case at one-and-three-quarters percent, monetary policy is
already in a restrictive position."
    The Bank of Canada has tightened its benchmark interest rate
125 basis points since July 2017, to a level of 1.75%.
    On Monday, Bank of Canada Governor Stephen Poloz expressed
guarded optimism that the country would emerge from a soft
patch, but maintained a cautious tone overall, saying the
economic outlook still warrants an interest rate below the
neutral range.              
    The central bank's estimate of neutral, the level at which
it is neither stimulating nor restraining the economy, is
between 2.5% and 3.5%.
    At 3:32 p.m. (1932 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3345 to the greenback, or 74.93 U.S.
cents. The currency, which touched on Monday its strongest level
in nearly two weeks at 1.3297, traded in a range of 1.3303 to
1.3375.
    The decline for the loonie came even as the price of oil,
one of Canada's major exports, rose to its highest this year on
the prospect that more sanctions against Iran and further
disruptions to Venezuelan output could deepen an OPEC-led supply
cut.             
    U.S. crude oil futures        settled 1.6% higher at $62.58
a barrel.
    Canadian government bond prices were higher across the yield
curve, with the 10-year             rising 33 Canadian cents to
yield 1.664%.
    Canada's 10-year yield fell 3.9 basis points more than the
yield on the 3-month T-bill to leave the longer-term yield
slightly below the short-term rate, a potential harbinger of
recession.             
    Canada's curve inverted in March for the first time since
2007.

    
 (Reporting by Fergal Smith
Editing by James Dalgleish)
  
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