December 5, 2019 / 4:55 PM / in 2 months

CANADA FX DEBT-C$ climbs to 4-week high as Bank of Canada cools rate cut bets

    * Loonie touches its strongest level since Nov. 6 at 1.3158
    * Canada's trade deficit narrows to C$1.1 billion in October
    * Price of U.S. oil increases by 0.9%
    * Canadian bond prices fall across a steeper yield curve

    By Fergal Smith
    TORONTO, Dec 5 (Reuters) - The Canadian dollar strengthened
on Thursday to its highest in nearly a month against the
greenback as data showed Canada's trade deficit narrowed and a
Bank of Canada official expressed confidence in the economic
outlook.
    Bank of Canada Deputy Governor Timothy said the domestic
economy remains resilient thanks to a strong labor market and
stable inflation.              
    On Wednesday, the central bank held its overnight interest
rate at 1.75% as expected and cited early signs the global
economy was stabilizing.             
    "Right now they (the Bank of Canada) seem to be okay with
where the economy is," said Bipan Rai, executive director and
North America Head, FX Strategy. "It implies that the market
shouldn't be pricing in a rate cut in January too aggressively."
    Chances of an interest rate cut in January have fallen to
less than 10% from 20% before Wednesday's rate decision, data
from the overnight index swaps market showed.           
    Currency analysts polled by Reuters said the Canadian dollar
will add to this year's gains over the coming 12 months as a
potential easing of global economic risk reduces pressure on the
Bank of Canada to support Canada's commodity-linked economy.
            
    The price of oil, one of Canada's major exports, rose on
expectations OPEC and allied oil producers will deepen output
cuts in an effort to prop up prices and prevent a glut next
year. U.S. crude oil futures        were up 0.9% at $58.93 a
barrel.      
    At 11:45 a.m. (1645 GMT), the Canadian dollar          was
trading 0.2% higher at 1.3178 to the greenback, or 75.88 U.S.
cents. The currency, which notched on Wednesday its biggest gain
in three months, touched its strongest intraday level since Nov.
6 at 1.3158.
    The loonie has been the top-performing G10 currency this
year, rising 3.5% against the greenback.            
    Canada posted a slightly narrower trade deficit in October
of C$1.1 billion as both exports and imports climbed, Statistics
Canada said. Exports rose by 0.8% to C$49.9 billion, while
imports were up by 0.5%.             
    In separate data, the Ivey Purchasing Managers Index (PMI)
rose in November to a three-month high at 60.0 from 48.2 in
October.             
    Canada's jobs report for November is due on Friday.    
    Canadian government bond prices were lower across a steeper
yield curve, with the 10-year             falling 58 Canadian
cents to yield 1.607%.
    The 10-year yield touched its highest intraday level since
Nov. 12 at 1.624%.

 (Reporting by Fergal Smith; Editing by David Gregorio)
  
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